Prices need no preferences: social trends determine decisions in experimental markets for pain relief.
Vlaev I., Seymour B., Chater N., Winston JS., Yoshida W., Wright N., Symmonds M., Dolan R.
OBJECTIVE: A standard view in health economics is that, although there is no market that determines the "prices" for health states, people can nonetheless associate health states with monetary values (or other scales, such as quality adjusted life year [QALYs] and disability adjusted life year [DALYs]). Such valuations can be used to shape health policy, and a major research challenge is to elicit such values from people; creating experimental "markets" for health states is a theoretically attractive way to address this. We explore the possibility that this framework may be fundamentally flawed-because there may not be any stable values to be revealed. Instead, perhaps people construct ad hoc values, influenced by contextual factors, such as the observed decisions of others. METHOD: The participants bid to buy relief from equally painful electrical shocks to the leg and arm in an experimental health market based on an interactive second-price auction. Thirty subjects were randomly assigned to two experimental conditions where the bids by "others" were manipulated to follow increasing or decreasing price trends for one, but not the other, pain. After the auction, a preference test asked the participants to choose which pain they prefer to experience for a longer duration. RESULTS: Players remained indifferent between the two pain-types throughout the auction. However, their bids were differentially attracted toward what others bid for each pain, with overbidding during decreasing prices and underbidding during increasing prices. CONCLUSION: Health preferences are dissociated from market prices, which are strongly referenced to others' choices. This suggests that the price of health care in a free-market has the capacity to become critically detached from people's underlying preferences.