The Validity of QALYs Under Non-Expected Utility

• Authors: José-Luis Pinto-Prades and Han Bleichrodt.
• BSE Working Paper: 113 | September 15
• Keywords: Non-expected utility , QALYs , utility curvature , aggregation
• JEL codes: D81, I10
• Non-expected utility
• QALYs
• utility curvature
• aggregation

This paper examines applications of non-expected utility in the health domain. The most widely used utility model in health economics, the time-linear QALY model, assumes (i) separability of quality of life and life duration, and (ii) linearity of the utility for life duration. We perform new tests, which are robust to violations of expected utility, of these two assumptions. The data support separability, but show that the utility for life duration is concave rather than linear. The finding of concave utility may not be surprising in itself. The contribution of this paper is to demonstrate this empirically without being invalidated by violations of expected utility.