Willingness to Pay (WTP) in Health Economics

Willingness to Pay (WTP) is the maximum you pay to gain a good; Willingness to Accept (WTA) is minimum payment you demand to forgo a good. Due to loss aversion, WTA > WTP (you demand more to give up something than you'd pay to acquire it). Example: smokers asked 'How much to quit smoking?' (WTP) might say $5,000/year; asked 'How much to start smoking?' (WTA) might say $50,000/year. This asymmetry is robust but complicates health valuation. Convention: use WTP for health improvements, WTA for health risks, but acknowledge gap.

Methods: (1) Cheap talk: tell respondents that survey results influence policy; this commitment device reduces hypothetical bias by ~25–50%. (2) Real-money experiments: conduct small incentivized trial (offer lottery, small real payment contingent on honest answer). (3) Calibration: if other studies show stated WTP is 3× actual, apply 3× discount factor. (4) Revealed preference: use actual market prices (co-payments, vaccine prices) as validation; if WTP much higher, discount WTP proportionally. Most rigorous: combination (cheap talk + real incentives + external validation).

Not directly. A US respondent (median income $60,000) might have WTP $10,000 for a vaccine; Nigerian respondent (median income $2,000) might have WTP $200—not because they value health differently, but due to income. For cross-country comparison: normalize WTP by income (e.g., % of annual income willing to pay) or use purchasing power parity (PPP) adjustments. Alternatively, use preference (DCE ranks, visual scales) rather than monetary WTP, which is less income-sensitive.

Minimum: 200–300 respondents for point estimate of mean WTP and basic subgroup analysis (age, gender). Larger (500–1,000+) if: (1) population is very heterogeneous (mean may mask diverse preferences); (2) subgroup analysis planned (separate estimates for patient types); (3) interaction effects of interest (e.g., does income modify effect of disease severity on WTP?). Sample size also depends on precision desired (confidence interval width) and expected variability in WTP.

WTP is monetary valuation of health derived from preferences ('What would you pay for this health state?'). QALY is a utility weight (0–1 scale) derived from preference elicitation (EQ-5D, TTO, VAS) ('How good is this health state?'). To convert: WTP can be used to infer implicit QALY value. If society WTP is $100,000 and a drug gains 5 QALYs, implicit value = $100,000 / 5 = $20,000/QALY (NICE-like threshold). Conversely, if WTP threshold is known, can assign cost-effectiveness threshold for QALYs.