Vlaev, I.; Seymour, B.; Dolan, R.J.; Chater, N.; (2009) The price of pain and the value of suffering. (ELSE Working Papers 319). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

Estimating the financial value of pain informs issues as diverse as the market price of analgesics, the cost-effectiveness of clinical treatments, compensation for injury, and the response to public hazards. Such costs are assumed to reflect a stable trade-off between relief of discomfort and money. Here, using an auction-based health market experiment, we show the price people pay for relief of pain is strongly determined by the local context of the market, determined either by recent intensities of pain, or their immediately disposable income, but not overall wealth. The absence of a stable valuation metric suggests that the dynamic behaviour of health markets is not predictable from the static behaviour of individuals. We conclude that the results follow the dynamics of habit formation models of economic theory, and as such, the study provides the first scientific basis for this type of preference modelling.

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