BEHAVIORAL ECONOMICS OF HEALTH BEHAVIOR Linh Bui

Role of Choice “Choose a job. Choose a career. Choose a family…Choose good health, low cholesterol, and dental insurance. Choose fixed-interest mortgage repayments. Choose a starter home…Choose your friends. Choose your future. Choose life. But why would I want to do a thing like that? I chose not to choose life: I chose something else. And the reasons? There are no reasons. Who needs reasons when you’ve got heroin?? _TRAINSPOTTING (1996) [Screenplay adapted from the novel by IRVINE WELSH]

Contents Characteristics of behavioral economics Forms of behavioral economics Quantifying the Relative value of Addictive Drugs and other commodities Demand curve Expenditure curve 2 strategies to assess demand for drugs/other commodities

Behavioral economics Understand decision making in population of unhealthy or at-risk individuals Overconsumption (substance abuse, obesity, etc.,) Health behavior linked to commodities (tangible consumable products)

Characteristics of behavioral economics Emphasis on individual person With given the amount of time, money, effort, how we make choices and what factors affect our decisions Understand the nature of rationality and irrationality in human behavior Homo economicus Homo irrationalis Other resources

Game theory “Prisoner’s dilemma” 1 st criminal2 nd criminal Both remain silentA 6-month- sentence 1 st criminal betrays the other FreeA 10-year- sentence Both betray each other A 5-year-sentence

Prospect theory Gambles (prospects) under conditions of risk are inconsistent in reference to whether there are gains or losses More conservative preferences for gains but more risky preferences for losses

Prospect theory Choice 1Choice 2 50% chance to win $150Definitely lose $100 50% chance to lose $10050% chance of winning $50 and 50% chance of losing $200 Preferences are a function of : –Absolute resources –Relative changes in resources

Matching law Matching between individual behavior and relative reinforcement available With a finite resources (time, money), how individuals access to activities (eating, drinking, spending leisure time) Study substance abuse, tobacco and food overconsumption: Relative value of alcohol, tobacco, food remains high in spite of escalating health and psychological costs (physical illness, financial burden,etc.,) Commodity overvaluation Impulsive temporal discounting Risky probability discounting: Willingness to accept greater probabilities of negative outcomes to gain larger rewards

Matching law :Example Overeating: Commodity overvaluation: Food (cheeseburgers,etc.,) is overvalued (at a certain price, consumption is higher and willingness to pay is also higher) Impulsive temporal discounting: Overvaluation of immediate rewards (pleasure of eating, reduce stress, etc.) Risky probability discounting: Willingness to accept greater probabilities of obesity and other related health problems

Matching law: Example Commodity overvaluation Impulsive temporal discounting Risky probability discounting: What might be the critical insight from matching law? The relative value of an outcome is jointly determined by the outcome itself and alternative sources of reinforcement

Matching law: Example Commodity overvaluation Impulsive temporal discounting Risky probability discounting: What might be the critical insight from matching law? The relative value of an outcome is jointly determined by the outcome itself and alternative sources of reinforcement

Quantifying Relative value of Addictive Drugs and other commodities Law of demand Cocaine vs money (Higgins et al. 1994) Relative value of a substance: Benefit-cost ratio applied to a substance at a given price

Demand curve

Intensity of demand

Demand curve Inelastic Elastic P max

Demand curve Elasticity : How consumption change relative to price changes Inelastic vs elastic Elasticity index: Overall cost-benefit ratio P max (Price maximum): how far demand goes before it starts to be affected by costs

O max (Output maximum) = maximum amount of money (or other resources) the individual was willing to spend on the commodity  How much a person value a commodity or behavior Expenditure curve O max

Laboratory demand paradigms In vivo consumption under escalating conditions of response to cost Pharmacological studies of abuse liability and/or therapeutic viability Avoid reliance on self-report High experimental burden, ethical issues

Purchase tasks Estimate drug consumption at escalating levels of price Support for hypothesis: substance dependence and overconsumption are characterized by overvaluation of the commodities Self-report data but stable

Purchase tasks Dynamic changes in relative value of a drug: Subjective states (craving and stress) drive motivation for drugs Study substance abuse in a person’s natural environment: measure the relative reinforcing efficacy (socializing, watching television, exercising,etc.,) Anhedonia: heavy drinkers and drug users report less reinforcement from a variety of nonsocial activities

Conclusion Characteristics of behavioral economics: Unit of analysis: individual person Understand the nature of rationality and irrationality in human behavior Matching law : Theoretical framework to understand overconsumption of addictive commodities Methods for demand assessment: Laboratory demand paradigms Purchase tasks How does behavioral economics link to previous theories?

23 DECISIONS/INTENTIONS SOCIAL S ITUATION BIOLOGY/ P ERSONALITY THE THEORY OF TRIADIC INFLUENCE ATTITUDES TOWARD THE BEHAVIOR SOCIAL NORMATIVE BELIEFS Trial Behavior EXPERIENCES: Expectancies -- Social Reinforcements -- Psychological/Physiological SELF-EFFICACY BEHAVIORAL CONTROL Nurture/CulturalBiological/Nature Intrapersonal StreamSocial/Normative StreamCultural/Attitudinal Stream Distal Influences Proximal Predictors Levels of Causation Ultimate Causes Social/ Personal Nexus Expectancies & Evaluations Affect and Cognitions Decisions Experiences a b c d e f g h i j k m n o p q r s t u v w x Related Behaviors J K C F I B E H A D G CULTURAL E NVIRONMENT