Exploring the Relationship Between Time Trade-off and Willingness-to-Pay: An Empirical Investigation
journal contributionposted on 08.06.2017, 07:13 by Smith, Richard
This paper explores the relative sensitivity of the Time Trade Off (TTO) and Willingness-To-Pay (WTP) valuation techniques to changes in health status. This was achieved by administering a WTP survey to a population of 50 subjects who had previously completed a TTO. These two sets of data were then analysed for relative sensitivity in valuing changes in health state, and also for any trend within the data which might illustrate a level of comparability between TTO and WTP values. The main findings were that: (i) TTO appeared to perform well in differentiating significantly between different levels of health within each dimension, but not so well in differentiating between different dimensions of health at the same nominal `level' of health status; (ii) WTP, compared with TTO, appeared to perform far less well in differentiating significantly between different dimensions of health at the same nominal `level' of health status, but performs slightly better at differentiating between different levels of health within each dimension; and (iii) there was no significant correlation found between the two values. Subject to two important caveats (that these results can only be considered indicative, rather than definitive, as they are based on a small sample, and that the WTP values reflect only a limited range of benefit - that of health status), this study indicates that, with the possible of exception of very poor health states, these two techniques should not be considered comparable, although, overall, WTP seems to be more sensitive to changes in levels of health status. However, the directions in which the data point are interesting, novel and worthy of continued research. These are: (i) that WTP values show greater dispersion around the mean/median as states become `worse', indicating perhaps the increasing impact of the budget constraint; (ii) that neither TTO nor WTP differentiates very well between broad dimensions of health (likely due to either the dimensions used, or that it is the level of health status which is important, and the dimension within which that level occurs is irrelevant); (iii) that WTP better differentiates between levels of health status within a dimension than TTO, implying that it is a more sensitive measure in the valuation of small changes in health status; and (iv) any comparability between techniques would have to be at the levels of health which are commonly viewed as being the worst, where the WTP in time or money is substantial to avoid them.