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Willingness to Accept Versus Willingness to Pay in a Discrete Choice Experiment

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Willingness to Accept Versus Willingness to Pay in a Discrete Choice Experiment Volume 11 • Number 7 • 2008 VALUE IN HEALTH Willingness to Accept versus Willingness to Pay in a Discrete Choice Experiment Janneke P. C. Grutters, PhD,1,2 Alfons G. H. Kessels, MD, MSc,1 Carmen D. Dirksen, PhD,1 Debby van Helvoort-Postulart, PhD,1 Lucien J. C. Anteunis, PhD,2 Manuela A. Joore, PhD1 1Department of Clinical Epidemiology and Medical Technology Assessment, University Hospital Maastricht, Maastricht,The Netherlands; 2Department of Otorhinolaryngology, Head and Neck Surgery, University Hospital Maastricht, Maastricht,The Netherlands ABSTRACT Objectives: Our main objective was to compare willingness Results: The cost coefficient was statistically significantly to accept (WTA) and willingness to pay (WTP) in a discrete higher in the WTP format. Marginal WTA was statistically choice experiment on hearing aid provision. Additionally, significantly higher than marginal WTP for the attributes income effect and endowment effect were explored as pos- accuracy and follow-up. Disparity was higher in the high sible explanations for the disparity between WTA and WTP, educational (as proxy for income) group. We did not find and the impact of using a WTA and/or WTP format to elicit proof of an experience endowment effect. Implementing the monetary valuations on the net benefit of the new organiza- new intervention would only be recommended when using tion of hearing aid provision was examined. WTP. Methods: Choice sets were based on five attributes: per- Conclusions: WTA exceeds WTP, also in a discrete choice former of the initial assessment; accuracy of the initial assess- experiment. As this affects monetary valuations, more ment; duration of the pathway; follow-up at the ear, nose, research on when to use a payment or a discount in the cost and throat specialist; and costs. Persons with hearing com- attribute is needed before discrete choice results can be used plaints randomly received a WTP (costs defined as extra in cost-benefit analyses. payment) or WTA (costs defined as discount) version of the Keywords: cost-benefit analysis, discrete choice experiment, experiment. In the versions, except for the cost attribute, all health services economics, methodology, monetary choice sets were equal. valuation. Introduction the change to make a respondent’s level of utility the same as before the change, while equivalent variation Studies that directly measure monetary values have measures the amount of money that is required before often found a disparity between a person’s willingness the change, to make utility the same as it would be to pay (WTP) for a good and his willingness to accept after the change. Within both these concepts, a distinc- (WTA) compensation to forgo the same good [1,2]. tion can be made between WTA (when compensation The aim of our study was to examine whether this is required) and WTP (when a payment is required). disparity also occurs when one indirectly measures Numerous contingent valuation studies have found monetary values in a discrete choice experiment. that WTA exceeds WTP [1,2], but in health care, this Monetary valuations are often elicited using contin- disparity has only been examined four times [6–9]. gent valuation [3,4]. In contingent valuation studies, Several explanations for the disparity between WTA one directly asks respondents how much money they and WTP have been suggested [10]. Standard eco- would be willing to pay or how much compensation nomic theory allows for two possible explanations, they would request for a hypothetical intervention. being an income effect and a lack of substitutes [11]. The resulting WTP or WTA is a measure of how much An income effect would occur because payment is con- the respondent values the intervention. Following strained by income, while demand of compensation is Hicks [5], one can use either the concept of compen- not. A total lack of substitutes would make it impos- sating variation or the concept of equivalent variation sible to compensate an individual for the removal of to measure monetary values. Compensating variation the good, and would therefore lead to extreme WTA measures the amount of money that is required after values. Another possible explanation, advanced by psychologists instead of economists, is the endowment Address correspondence to: Janneke Grutters, MAASTRO Clinic, PO Box 5800, 6202 AZ Maastricht, The Netherlands. effect [12]. The endowment effect is closely related to E-mail: [email protected] loss aversion, and suggests that desirable goods are 10.1111/j.1524-4733.2008.00340.x more valuable when they are part of one’s endowment. 1110 © 2008, International Society for Pharmacoeconomics and Outcomes Research (ISPOR) 1098-3015/08/1110 1110–1119 Willingness to Accept vs.Willingness to Pay 1111 That is, persons value the loss of something they own potential losers and a WTP format for potential or have experienced higher than the acquirement of the gainers to elicit monetary values on the net benefit of same thing when they do not have or have not expe- the new organization of hearing aid provision. rienced it. Other possible explanations are related to the difference between buyers and sellers, and are explained elsewhere [10]. Methods In contingent valuation studies, a difference is made Setting between persons who would gain utility from imple- Approximately 10% of the general population of menting the intervention (potential “gainers”) and Western countries is hearing impaired, and this pre- persons who would lose utility from implementing the valence heavily increases with age [21,22]. For most intervention (potential “losers”). Potential gainers hearing-impaired persons, hearing aid fitting is an should be asked to state their maximum WTP for the effective intervention [23,24]. In The Netherlands, intervention, while potential losers should be asked to persons with a hearing loss exceeding 35 dB, averaged state their minimum WTA for the intervention [13,14]. over 1, 2, and 4 kHz in the better ear, are entitled to a Nevertheless, it has also been advocated to always use reimbursement by their medical insurance. Generally, WTP, as WTP results are judged to be more valid and the hearing aid dispenser collects the reimbursement, more conservative [4,15]. and the patient is billed only for that part of the An alternative method to elicit monetary valuations hearing aid price that exceeds the reimbursement, is discrete choice experimentation [16,17]. Discrete which is referred to as the out-of-pocket payment. choice experiments are developed in mathematical psy- Given the aging of the population, the prevalence chology and marketing, and are increasingly used in and, as a result, the health-care costs associated with health services research [17–19]. When a cost attribute hearing rehabilitation will continue to increase. is included in the experiment, the WTP or the WTA Because of the increasing costs and anticipated short- compensation for a unit change in an attribute can be age of ear, nose, and throat (ENT) specialists in the calculated. Subsequently, each alternative set of change care for hearing-impaired persons, direct hearing aid in the levels of the attributes can be given a monetary provision by private hearing aid dispensers is currently value, which allows for use in a cost-benefit analysis, under evaluation in The Netherlands, as well as in where the costs of a program are compared to its other countries in Europe. Besides issues of safety and monetary benefits [14]. Much of the appeal of discrete efficiency, it is important to consider patient prefer- choice experimentation lays in that it enables us to ences regarding the organization of hearing aid provi- understand the trade-offs between attributes. This can, sion. Direct hearing aid provision by private dispensers for instance, provide valuable information for health- can be perceived as both favorable and unfavorable, care workers deciding between alternative ways of the depending on patients’ individual preferences. In a provision of a health-care commodity. Another advan- previous study [25] we asked persons with hearing tage of discrete choice experimentation is that it does complaints to grade direct hearing aid provision and not directly ask respondents to express an amount of provision by referral. We found that 42% of the money, so strategic behavior or protest answers are less respondents preferred hearing aid provision by refer- likely to occur [20]. ral; 39% preferred direct hearing aid provision, and Until now, to our knowledge, no publications have 18% graded them equally. As there are patients who addressed the disparity between WTA and WTP in prefer direct hearing aid provision as well as patients discrete choice experiments. As a result, lack of clarity who prefer provision by referral, implementation of exists on when to use WTA or WTP in discrete choice direct hearing aid provision will generate both gainers experimentation. and losers. This makes the case of direct hearing aid The main objective of our study was to examine provision especially suitable for examining the dispar- whether using a WTA and a WTP format for the cost ity between WTA and WTP. attribute in a discrete choice experiment elicits differ- ent preferences and monetary values. We examined this in a discrete choice experiment on transferring Questionnaire Design elements of hearing aid provision from the medical Twelve possible attributes of interest were identified by sector to private hearing aid dispensers. If we find a experts. Of these attributes, the five most important disparity
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