NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Charles E. Phelps

University of Rochester
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Institutional Affiliation: University of Rochester

NBER Working Papers and Publications

September 1992Economic Foundations of Cost Effective Analysis
with Alan M. Garber: w4164
In order to address several controversies in the application of cost-effectiveness analysis, we investigate the principles underlying the technique and discuss the implications for the evaluation of medical interventions. Using a standard von Neumann-Morgenstern utility framework, we show how a cost-effectiveness criterion can be derived to guide resource allocation decisions. We investigate its relation to age, gender, income level, and risk aversion. Cost-effectiveness analysis can be a useful and powerful tool for resource allocation decisions, but in the presence of heterogeneous preferences and personal characteristics, a cost-effectiveness criterion that is applied at the population level is unlikely to yield pareto-optimal resource allocations.

Published: Journal of Health Economics, Vol. 16 (1997): 1-31.

1978Illness Prevention and Medical Insurance
in The Economics of Physician and Patient Behavior, Victor R. Fuchs and Joseph P. Newhouse, editors
1976Demand for Reimbursement Insurance
in The Role of Health Insurance in the Health Services Sector, Richard N. Rosett
New Estimates of Price and Income Elasticities of Medical Care Services
with Joseph P. Newhouse
in The Role of Health Insurance in the Health Services Sector, Richard N. Rosett
 
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