The aim of the present study is to compare the survival rates and cost-effectiveness of different treatment strategies for small (<2 cm) hepatocellular carcinoma (HCC). Markov chains are developed to model different management strategies for patients with compensated cirrhosis and small HCC. Probabilities of progression and survival and the likelihood of orthotopic liver transplantation are taken from the literature and incorporated into the models. As a starting population, 1000 patients are followed over a period of 10 years. Patients treated immediately with transarterial chemoembolization (TACE) or radiofrequency ablation (RFA) live as long as or longer than patients who are monitored expectantly with the intention of liver transplantation once the HCC has grown larger than 2 cm and a higher transplant priority score becomes available. With TACE, immediate treatment results in an average survival time of 4.269 years versus 4.324 years with the monitoring strategy. With RFA, immediate treatment results in an average survival time of 5.273 years versus 5.236 years with the monitoring strategy. In addition, the cost analysis shows that immediate treatment with either TACE or RFA is less expensive than monitoring. The better cost-effectiveness of immediate therapy versus the monitoring strategy remains robust and unaffected by variations of the assumptions built into the model. In conclusion, in patients with compensated cirrhosis and small HCC, a strategy of immediate treatment with either TACE or RFA prevails over a strategy of expectant monitoring with the intention of transplantation.