Optimal revelation of life-changing information

Nikolaus Schweizer and Nora Szech

No 90, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: Information about the future may be instrumentally useful, yet scary. For example, many patients shy away from precise genetic tests about their dispositions for severe diseases. They are afraid that a bad test result could render them desperate due to anticipatory feelings. We show that partially revealing tests are typically optimal when anticipatory utility interacts with an instrumental need for information. The same result emerges when patients rely on probability weighting. Optimal tests provide only two signals, which renders them easily implementable. While the good signal is typically precise, the bad one remains coarse. This way, patients have a substantial chance to learn that they are free of the genetic risk in question. Yet even if the test outcome is bad, they do not end in a situation of no hope.

Keywords: Test Design; Revelation of Information; Design of Beliefs; Medical Tests; Anticipatory Utility; Huntington's Disease (search for similar items in EconPapers)
JEL-codes: D81 D82 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ias, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Revelation of Life-Changing Information (2018)
Working Paper: Optimal Revelation of Life-Changing Information (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:90

DOI: 10.5445/IR/1000055427

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