Optimal Expectations and Limited Medical Testing: Evidence from Huntington Disease

Emily Oster, Ira Shoulson and E. Ray Dorsey

No 17629, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use novel data to study the decision to undergo genetic testing by individuals at risk for Huntington disease (HD), a hereditary neurological disorder that reduces healthy life expectancy to about age 50. Although genetic testing is perfectly predictive and carries little financial or time cost, less than 10 percent of at-risk individuals are tested prior to the onset of symptoms. Testing rates are higher for individuals with higher ex ante risk of carrying the genetic expansion for HD. Untested individuals express optimistic beliefs about their probability of having HD and make fertility, savings, labor supply, and other decisions as if they do not have HD, even though individuals with confirmed HD behave quite differently. We show that these facts are qualitatively consistent with a model of optimal expectations (Brunnermeier and Parker, 2005) and can be reconciled quantitatively in this model with reasonable parameter values. This model nests the neoclassical framework and, we argue, provides strong evidence rejecting the assumptions of that framework. Finally, we briefly develop policy implications.

JEL-codes: D81 D84 I12 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-hea and nep-upt
Note: EH LS
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Citations: View citations in EconPapers (6)

Published as “Optimal Expectations and Limited Medical Testing: Evidence from Huntington's Disease” (with E. Ray Dorsey and Ira Shoulson). American Economic Review, 103 (2): p. 804-830 (April 2013).

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