Cost–Benefit Analysis and Health Care Evaluations, Second Edition

Cost–Benefit Analysis and Health Care Evaluations, Second Edition

Robert J. Brent

Cost–benefit analysis is the only method of economic evaluation that can effectively indicate whether a health care treatment or intervention is worthwhile. In this thoroughly updated and revised second edition, Robert Brent expands the scope of the field by including the latest concepts and applications throughout all regions of the world. This book attempts to strengthen the link between cost–benefit analysis and the mainstream health care evaluation field, which is dominated by non-economists. The need to build a bridge between the two is more important than ever before, as the general understanding of cost-benefit analysis appears to have regressed.

Chapter 12: Cost–benefit analysis and willingness to pay

Robert J. Brent

Subjects: economics and finance, health policy and economics, valuation, environment, valuation, social policy and sociology, health policy and economics

Extract

Willingness to pay is at the core of CBA and in this chapter we explain why this is so. Willingness to pay should be used when consumer sovereignty holds. Consumer sovereignty requires rationality and full information. When we explain the principles of WTP, and discuss applications, we will do so with the requirements of consumer sovereignty explicitly in mind. In the introduction we start by affirming how WTP relies on consumer sovereignty and present the welfare economic base to WTP in CBA. We then go on to review some of the main methods for valuing WTP. Because WTP is constructed differently for some health care goods that are public goods, this difference needs explaining. Section 12.2 examines in detail the role of consumer sovereignty in WTP and CBA. Section 12.3 compares and contrasts WTP with WTA, willingness to accept. Section 12.4 deals with the special case where WTP is being used in the context of rationing by time rather than by price. The applications section highlights the many considerations that need to be understood when using WTP for health care CBAs.

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