The measurement of preferences over the distribution of benefits: the importance of the reference point

Title: The measurement of preferences over the distribution of benefits: the importance of the reference point
Authors: Dolan, Paul and Robinson, Angela
Publisher: European economic review, 45 (9). pp. 1697-1709
ISSN: 0014-2921
View Publication

Abstract: This paper uses the Atkinson method, which was initially developed to measure the shape of the social welfare function (SWF) in the domain of income, to measure the shape of the SWF with respect to the distribution of health benefits. Two separate studies were conducted involving a total of 71 respondents. A comparison of the results across the two studies suggests that reference point effects play an important role in determining responses. Thus, more research is needed on the role that reference point effects ought to and do play in determining the nature and extent of the efficiency – equity trade-off before the results of studies of this kind can be interpreted as ‘equity parameters’ which may simply be ‘plugged into’ an appropriately specified SWF.