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Testing rank‐dependent utility theory for health outcomes
Author(s) -
Oliver Adam
Publication year - 2003
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.769
Subject(s) - context (archaeology) , rank (graph theory) , test (biology) , descriptive research , predictive power , psychology , econometrics , economics , statistics , mathematics , epistemology , paleontology , philosophy , combinatorics , biology
Systematic violations of expected utility theory (EU) have been reported in the context of both money and health outcomes. Rank‐dependent utility theory (RDU) is currently the most popular and influential alternative theory of choice under circumstances of risk. This paper reports a test of the descriptive performance of RDU compared to EU in the context of health. When one of the options is certain, violations of EU that can be explained by RDU are found. When both options are risky, no evidence that RDU is a descriptive improvement over EU is found, though this finding may be due to the low power of the tests. Copyright © 2002 John Wiley & Sons, Ltd.