Probabilistic sensitivity analysis and value of information analysis

This chapter focuses on the assessment of economic model uncertainty using Bayesian methods. Different sources of uncertainty in economic modelling are introduced. Approaches to deal with these sources of uncertainty are described. In particular, it is shown that probabilistic sensitivity analysis can help quantify parametric uncertainty in an economic model. Value of information analysis can then be employed to estimate the potential benefits associated with reducing parametric uncertainty. The practical steps required to conduct probabilistic and value of information analysis with an existing model are discussed. These methods can be useful to researchers who seek to gather more generalizable data to inform future iterations of economic models.