Rates and probabilities in economic modelling: Transformation, translation and appropriate application

Rachael L. Fleurence, Christopher S. Hollenbeak

Research output: Contribution to journalReview articlepeer-review

99 Scopus citations

Abstract

Economic modelling is increasingly being used to evaluate the cost effectiveness of health technologies. One of the requirements for good practice in modelling is appropriate application of rates and probabilities. In spite of previous descriptions of appropriate use of rates and probabilities, confusions persist beyond a simple understanding of their definitions. The objective of this article is to provide a concise guide to understanding the issues surrounding the use of rates and probabilities reported in the literature in economic models, and an understanding of when and how to transform them appropriately. The article begins by defining rates and probabilities and shows the essential difference between the two measures. Appropriate conversions between rates and probabilities are discussed, and simple examples are provided to illustrate the techniques and pitfalls. How the transformed rates and probabilities may be used in economic models is then described and some recommendations are suggested.

Original languageEnglish (US)
Pages (from-to)3-6
Number of pages4
JournalPharmacoEconomics
Volume25
Issue number1
DOIs
StatePublished - Jan 1 2007

All Science Journal Classification (ASJC) codes

  • Pharmacology
  • Health Policy
  • Public Health, Environmental and Occupational Health

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