Threats to the estimation of benefit: are preference elicitation methods accurate?

Two methods (willingness to pay and conjoint analysis) are considered within the context of the literature from psychology regarding how people construct preferences, process information, and make decisions.

Abstract

Stated preference methods are used to estimate the value that people place on health care. The data that emerges from these studies is used to guide health policy. However, relatively little is known about how individuals make decisions in a preference elicitation task. Two methods (willingness to pay and conjoint analysis) are considered within the context of the literature from psychology (and also environmental economics) regarding how people construct preferences, process information, and make decisions. There is substantial evidence that individuals employ heuristics (cognitive shortcuts) in order to simplify tasks they are presented with. The use of heuristics implies that people ignore much of the information they are presented with and make decisions which would not be considered rational in the economic sense. These stated preference methods assume that individuals trade between the different attributes of a good or service when making decisions - an assumption that other theories predict is wrong. The implications of this are discussed.