Cost–Benefit Analysis and Health Care Evaluations
Show Less

Cost–Benefit Analysis and Health Care Evaluations

Robert J. Brent

Cost–benefit analysis is the only method of economic evaluation which can effectively indicate whether a health care treatment or intervention is worthwhile. This book attempts to build a bridge between cost–benefit analysis, as developed by economists, and the health care evaluation literature which relies on other evaluation approaches such as cost-minimization, cost-effectiveness analysis and cost–utility analysis.
Buy Book in Print
Show Summary Details

Chapter 12: Cost–Benefit Analysis and Willingness to Pay

Robert J. Brent

Extract

12. Cost–benefit analysis and willingness to pay 12.1 INTRODUCTION WTP is at the core of CBA and in this chapter we explain why this is so. WTP 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. We start by affirming how WTP relies on consumer sovereignty and go on to review 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 presents the welfare economic base to WTP in CBA. Section 12.3 deals with the special case where WTP is being used in the context of rationing by time rather than by price. The applications highlight the many considerations that need to be understood when using WTP for health care CBAs. 12.1.1 WTP and Consumer Sovereignty To maximize utility the individual equates PϭMU. The price that someone is willing to pay therefore measures the satisfaction from consuming a good. The total satisfaction, i.e., the benefits, from consumption is the aggregate WTP for all units of the good. In most circumstances, both within and outside the health care field, WTP is the correct approach to measure benefits. Only this method is consistent with one of the fundamental principles of modern economics based on consumer utility maximization. With resources (income)...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.


Further information

or login to access all content.