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ESTIMATING THE BAYESIAN LOSS FUNCTION

A Conjoint Analysis Approach

Published online by Cambridge University Press:  25 May 2001

Mohan V. Bala
Affiliation:
Centocor, Inc.
Josephine Mauskopf
Affiliation:
Research Triangle Institute

Abstract

Current health economic literature does not provide clear guidelines on how uncertainty around cost-effectiveness estimates should be incorporated into economic decision models. Bayesian analysis is a promising alternative to classical statistics for incorporating uncertainty in economic analysis. Estimating a loss function that relates outcomes to societal welfare is a key component of Bayesian decision analysis. Health economists commonly compute the loss function based on the quality-adjusted life-years associated with each outcome. However, if welfare economics is adopted as the theoretical foundation of the analysis, a loss function based in cost-benefit analysis (CBA) may be more appropriate. CBA has not found wide use in health economics due to practical issues associated with estimating such a loss function. In this paper, we present a method based in conjoint analysis for estimating the CBA loss function that can be applied in practice. We illustrate the use of the methodology using data from a pilot study.

Type
Research Article
Copyright
© 2001 Cambridge University Press

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