On hypothetical bias and calibration in cost-benefit studies

Despite a sound foundation in economic welfare theory, willingness to pay ( WTP) has not been used as a measure of benefits in economic evaluations of health and health care to the same extent as in other fields. Some have sug gested that this is due to non-economists' reluctance to placing dollar val ues on the benefits of health care. However, another potential reason could be uncertainties about the validity of the WTP measure. In this paper, we outline the bias problems with the WTP method, and specifically focus on hy pothetical bias; i.e. whether the WTP from hypothetical elicitation methods overstates the real WTP or not. This is done by examining the literature i n this field, with emphasis on economic experiments where then is a greater possibility for comparison. The findings are that hypothetical WTP in gene ral significantly overestimates real WTP, but that calibration methods to r educe or eliminate this difference are currently bring developed. We conclu de that while the area is still very much under development, there seem to be reasons to view the use of cost-benefit analysis as a reasonable alterna tive to the more common cost-effectiveness analysis. (C) 2000 Published by Elsevier Science Ireland Ltd. All rights reserved.