Time Preference for Health Gains Versus Health Losses

Abstract

The purpose of this research was to determine whether people devalue further health gains differently from future health losses. 108 subjects in various states of health were randomised to groups that rated their preference for a hypothetical health gain or loss of variable duration and delay, in the condition of arthritis. Direction and duration of the hypothetical future health change had an interactive effect on time preference (p less than 0.001). For the health gain, devaluation due to delay was consistent across durations. For the health loss, devaluation depended on duration; the long-duration loss was devalued with delay while the fleeting loss was inflated. These findings cast doubt on the assumptions of positive time preference and constant rate discounting that underlie the classical model of discounting. They provide support for a theory of intertemporal choice which posits that vivid, fleeting, future events engender 'anticipation utility' which attenuates positive time preference. Our findings suggest that standard practices for discounting future health outcomes in economic evaluations of arthritis and possibly other conditions may need to be re-examined.

The Development of a Theory of Rational Intertemporal Choice

“…Thaler (1981) showed the underlying discount rates differ significantly for both framings. In fact, in many studies subjects have shown a preference to incur in a loss immediately rather than delaying it (Benzion, Rapoport & Yagil 1989;Loewenstein 1987;MacKeigan et al 1993;Mischel, Grusec & Masters 1969;Redelmeier & Heller 1993;Yates & Watts 1975).…”

Time Preferences for Life-Saving Programs: Evidence from Six Less Developed Countries

“…[Nonconstant exponential discounting has been found in stated-preference as well as revealed-preference studies, using not only monetary rewards (12,(15)(16)(17)(18)(19)(20)(21)(22) but also nonmonetary rewards (4,10,(23)(24)(25) Figure 1 compares the discount factors generated by the constant exponential function (r ) 0.10) and a generalized hyperbolic function (F ) 0.20; R ) 0.20). Given these parameter values, the hyperbolic discount function places less weight on the near future than the constant exponential discount function and greater weight on the more distant future.…”

Applying Behavioral Economics to the Public Sector

“…This may apply to the loss scenarios as well. In the experimental or survey settings where this theory has been tested, the loss scenarios are certain and clearly defined, so that the sequence had integrity (MacKeigan et al 1993;Redelmeier and Heller 1993). In many real world scenarios, the time period during which someone has to absorb a loss created by borrowing is somewhat indeterminate.…”