Purpose: The person tradeoff is widely used as a measure of health, but unlike the standard gamble does not have a basis in utility theory to support its use. In this study we identify preference conditions in utility theory that guarantee the validity of person tradeoffs. We then test these preference conditions underlying the PTO in an experiment.
Method: One-hundred thirteen students from the University of Southern California and Erasmus University Rotterdam, served as subjects in an experiment that tested the PTO assumption of Marginality (the social decision maker has equal preference between policies that, for each individual, have the same expected benefit) and Additivity (a policy whereby half the persons improve from health state A to B and half from B to C is equal in preference to a policy whereby half move from A to C and the other half make no improvement). Two Marginality and one Additivity question were employed in the experiment.
Result: With respect to Marginality, approximately 40% of the subjects satisfied this condition in each test separately. Seventy percent of the subjects who satisfy marginality in the first test also satisfied marginality in the second test. Consequently, about 25% of the subjects satisfy marginality in both tests. With regard to Additivity, subjects were generally not indifferent between policies for which improvements were additive. A majority of subjects, 70% (p < 0.001) preferred to give some health improvement to everyone rather than give a subset of individuals a large improvement and everyone else no improvement.
Conclusion: The findings of this study put in doubt the PTO requirement of Additivity of preference, and provide only limited support for Marginality. We hope that this paper will help to clarify what is involved in using the PTO and will foster future empirical research into its validity.
Candidate for the Lee B. Lusted Student Prize Competition