An age-embedding effect: time sensitivity and time insensitivity when pricing health benefits.
Benefits are often extended over time. One determinant of this benefit duration is how long a person will live to enjoy them. In four studies, we investigated whether people are sensitive to age when pricing benefits that will last for the remainder of one's life. In Study 1 drivers gave their willingness-to-pay (WTP) to cure a medical condition which would stop them from driving. Results showed an age-embedding effect: WTP was unrelated to the estimated number of driving years left. Study 2 tested whether age-embedding arose because people have a lot of information about themselves which dilutes the impact of age on their valuations. In Studies 3 and 4 we investigated whether people believed that age was an important consideration, or if they failed to properly incorporate it into their judgment. Results indicate that little weight is given to age when making individual pricing decisions, although people did not believe it was normatively irrelevant.
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Department of Operational Research, London School of Economics and Political Science, UK. d.read@lse.ac.uk
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D000328:Adult; D000367:Age Factors; D000368:Aged; D000369:Aged, 80 and over; D000704:Analysis of Variance; D001334:Automobile Driving; D003362:Cost-Benefit Analysis; D003657:Decision Making; D004739:England; D005260:Female; D005382:Financing, Personal; D006801:Humans; D016014:Linear Models; D008297:Male; D008875:Middle Aged; D013997:Time Factors; D026712:Value of Life