Time trade-off or time gain?: It all depends on your point of reference

Traditionally, attempts to measure utilities for health states under certainty have involved the time trade-off method in which respondents are asked to consider what length of life they are willing to give up to improve their health. Underlying this approach is the notion that the amount of time traded off is varied until the subject is indifferent between remaining in a health state that is less than ‘full health’ for a defined period of time t and shorter period of time x in ‘full health’. Implicitly this assumes a person’s reference position is to have an initial endowment of time t and to be in ‘less than full health’. However, this is not the only reference position since a person can also start in full health with an initial endowment of time x and accept a gain in time in order to compensate them for a reduction in health status. The purpose of this paper is to examine the importance of the reference position by conducting an experiment in which we compare estimates of utility based on time trade-off and time gain formats for two different health states from the EQ-5D in a pilot survey of University students (n=53). In particular we examine whether these choices are subject to loss aversion in which people value gains less than losses that is known to influence other aspects of economic behaviour. The final section of the paper considers which reference point should be used in future applied studies that attempt to value utilities for health states under certainty. *Correspondence to: Philip Clarke Health Economics Research Centre University of Oxford Institute of Health Sciences Old Road Oxford, OX3 7LF Tel: 44-1865-226691 Fax: 44-1865-226842 Email: [email protected]