Stochastic modelling

In economic evaluation of healthcare interventions, stochastic uncertainty is one of a number of sources of uncertainty (others are parameter uncertainty, structural uncertainty and methodological uncertainty), and refers to random variation in outcomes between otherwise identical people. This is distinct from heterogeneity, which refers to variation between patients attributable to variations in the observed characteristics of those patients. Cohort state transition models (see Markov models) generally do not consider stochastic uncertainty (in their base case or sensitivity analyses) so individual-level micro-simulation or discrete event simulation models will be needed if this is important.