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A consistency test of the time trade-off
Bleichrodt, Han; Pinto, José Luis; Abellán-Perpiñán, José María
Universitat Pompeu Fabra. Departament d'Economia i Empresa
This paper tests the internal consistency of time trade-off utilities.We find significant violations of consistency in the direction predictedby loss aversion. The violations disappear for higher gauge durations.We show that loss aversion can also explain that for short gaugedurations time trade-off utilities exceed standard gamble utilities. Ourresults suggest that time trade-off measurements that use relativelyshort gauge durations, like the widely used EuroQol algorithm(Dolan 1997), are affected by loss aversion and lead to utilities thatare too high.
Labour, Public, Development and Health Economics
cost-utility analysis
time trade-off
loss aversion
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