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Incorporating option values into the economic evaluation of health care technologies

Research output: Contribution to journalArticle

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Incorporating option values into the economic evaluation of health care technologies. / Palmer, S; Smith, P C.

In: Journal of Health Economics, Vol. 19, No. 5, 09.2000, p. 755-766.

Research output: Contribution to journalArticle

Harvard

Palmer, S & Smith, PC 2000, 'Incorporating option values into the economic evaluation of health care technologies', Journal of Health Economics, vol. 19, no. 5, pp. 755-766.

APA

Palmer, S., & Smith, P. C. (2000). Incorporating option values into the economic evaluation of health care technologies. Journal of Health Economics, 19(5), 755-766.

Vancouver

Palmer S, Smith PC. Incorporating option values into the economic evaluation of health care technologies. Journal of Health Economics. 2000 Sep;19(5):755-766.

Author

Palmer, S ; Smith, P C. / Incorporating option values into the economic evaluation of health care technologies. In: Journal of Health Economics. 2000 ; Vol. 19, No. 5. pp. 755-766.

Bibtex - Download

@article{94b0ba0235454e5289dd63edca322ddd,
title = "Incorporating option values into the economic evaluation of health care technologies",
abstract = "Despite uncertainty being intrinsic to economic evaluation of health care, existing techniques for handling uncertainty remain underdeveloped compared to the formal techniques commonly applied in the business sector. This paper develops an alternative approach to handling uncertainty in economic evaluation based on 'option-pricing' techniques. The presence of uncertainty and the degree of irreversibility of a decision make it clear that some flexibility in the timing of a decision is often a desirable characteristic with an economic value. We demonstrate how option-pricing techniques can be applied to the decision rules for economic evaluation in health care. The key determinants of an option value are the presence and type of uncertainty; the ability to defer a decision; and the irreversibility of the decision. The relative significance of each of these for a particular economic evaluation will depend on the particular characteristics of the technology under consideration. (C) 2000 Elsevier Science B.V. All lights reserved. JEL classification: H51: I18.",
keywords = "option-pricing, economic evaluation, uncertainty, methodology, UNCERTAINTY",
author = "S Palmer and Smith, {P C}",
year = "2000",
month = "9",
language = "English",
volume = "19",
pages = "755--766",
journal = "Journal of Health Economics",
issn = "0167-6296",
publisher = "Elsevier",
number = "5",

}

RIS (suitable for import to EndNote) - Download

TY - JOUR

T1 - Incorporating option values into the economic evaluation of health care technologies

AU - Palmer, S

AU - Smith, P C

PY - 2000/9

Y1 - 2000/9

N2 - Despite uncertainty being intrinsic to economic evaluation of health care, existing techniques for handling uncertainty remain underdeveloped compared to the formal techniques commonly applied in the business sector. This paper develops an alternative approach to handling uncertainty in economic evaluation based on 'option-pricing' techniques. The presence of uncertainty and the degree of irreversibility of a decision make it clear that some flexibility in the timing of a decision is often a desirable characteristic with an economic value. We demonstrate how option-pricing techniques can be applied to the decision rules for economic evaluation in health care. The key determinants of an option value are the presence and type of uncertainty; the ability to defer a decision; and the irreversibility of the decision. The relative significance of each of these for a particular economic evaluation will depend on the particular characteristics of the technology under consideration. (C) 2000 Elsevier Science B.V. All lights reserved. JEL classification: H51: I18.

AB - Despite uncertainty being intrinsic to economic evaluation of health care, existing techniques for handling uncertainty remain underdeveloped compared to the formal techniques commonly applied in the business sector. This paper develops an alternative approach to handling uncertainty in economic evaluation based on 'option-pricing' techniques. The presence of uncertainty and the degree of irreversibility of a decision make it clear that some flexibility in the timing of a decision is often a desirable characteristic with an economic value. We demonstrate how option-pricing techniques can be applied to the decision rules for economic evaluation in health care. The key determinants of an option value are the presence and type of uncertainty; the ability to defer a decision; and the irreversibility of the decision. The relative significance of each of these for a particular economic evaluation will depend on the particular characteristics of the technology under consideration. (C) 2000 Elsevier Science B.V. All lights reserved. JEL classification: H51: I18.

KW - option-pricing

KW - economic evaluation

KW - uncertainty

KW - methodology

KW - UNCERTAINTY

M3 - Article

VL - 19

SP - 755

EP - 766

JO - Journal of Health Economics

T2 - Journal of Health Economics

JF - Journal of Health Economics

SN - 0167-6296

IS - 5

ER -