Health Values and Prospect Theory

Abstract

In a recent volume of Medical Decision Making, Treadwell and Lenert stated that under prospect theory, community members compared with patients underestimate the utility of health improvements. In this comment, the authors show that this statement holds only for a subset of possible preference functions. Furthermore, the authors provide arguments that, in general, the rater's current health state is not the appropriate reference level if applying prospect theory to health valuations.

Health Values, Preference Inconsistency, and Insurance Demand

“…Stratmann-Schoene and Klose (2001) oppose this interpretation of prospect theory. In their view, prospect theory requires that the hypothetical health state be the point of reference.…”