On hypothetical bias and calibration in cost-benefit studies

Bengt Liljas, Karen Blumenschein

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

Despite a sound foundation in economic welfare theory, willingness to pay (WTP) has not been used as a measure of benefits in economic evaluations of health and health care to the same extent as in other fields. Some have suggested that this is due to non-economists' reluctance to placing dollar values on the benefits of health care. However, another potential reason could be uncertainties about the validity of the WTP measure. In this paper, we outline the bias problems with the WTP method, and specifically focus on hypothetical bias; i.e. whether the WTP from hypothetical elicitation methods overstates the real WTP or not. This is done by examining the literature in this field, with emphasis on economic experiments where there is a greater possibility for comparison. The findings are that hypothetical WTP in general significantly overestimates real WTP, but that calibration methods to reduce or eliminate this difference are currently being developed. We conclude that while the area is still very much under development, there seem to be reasons to view the use of cost-benefit analysis as a reasonable alternative to the more common cost-effectiveness analysis. Copyright (C) 2000 Elsevier Science Ireland Ltd.

Original languageEnglish
Pages (from-to)53-70
Number of pages18
JournalHealth Policy
Volume52
Issue number1
DOIs
StatePublished - May 2000

Keywords

  • Calibration
  • Contingent valuation
  • Cost-benefit analysis
  • Economic evaluation
  • Hypothetical bias
  • Willingness to pay

ASJC Scopus subject areas

  • Health Policy

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