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PRIORITY SETTING IN HEALTH CARE: DISENTANGLING RISK AVERSION FROM INEQUALITY AVERSION
Author(s) -
Echazu Luciana,
Nocetti Diego
Publication year - 2013
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.2858
Subject(s) - social welfare function , inequality , risk aversion (psychology) , preference , inequity aversion , social preferences , economics , health care , welfare , expected utility hypothesis , function (biology) , resource allocation , revealed preference , social welfare , actuarial science , microeconomics , econometrics , public economics , mathematical economics , mathematics , mathematical analysis , evolutionary biology , market economy , biology , economic growth , political science , law
In this paper, we introduce a tractable social welfare function that is rich enough to disentangle attitudes towards risk in health outcomes from attitudes towards health inequalities across individuals. Given this preference specification, we evaluate how the introduction of uncertainty over the severity of illness and over the effectiveness of treatments affects the optimal allocation of healthcare resources. We show that the way in which uncertainty affects the optimal allocation within our proposed specification may differ sharply from that in the standard expected utility framework. Copyright © 2012 John Wiley & Sons, Ltd.