Combining behavioural and health economics

Abstract This study is an effort in including the self-reflective view of behavioural economics into the field of health economics. With the use of the ‘Allais paradox’ modified for health outcomes, it is tested whether expected utility or rather a concept of psychological values should be used in modelling health-related human behaviour. Two experiments are conducted. The first experiment consists of a questionnaire with health-related trade-offs between different prospects, including the ‘Allais questions’ with health outcomes. With two binomial tests the predictions of both frequent and systematic violations of expected utility theory are confirmed. The second experiment consist of two additional ‘treatment’ questionnaires including three treatment questions in addition to the five health-related questions of the first experiment’s questionnaire. The treatments account for a change of initial state of mind before answering the Allais questions by using the method of ‘identity-salience’. A Pearson’s chi-square test is used to measure the association between the treatments (gambler and investor) and the choices made in the Allais questions. The results of this experiment are not conclusive yet in confirming the validity of psychological values in the context of health due to a low number of subjects. Therefore the need for further research on the concept of psychological values in the context of health decisions involving risk is emphasized.