Treatment decisions under ambiguity

Loïc Berger, Han Bleichrodt and Louis Eeckhoudt

Journal of Health Economics, 2013, vol. 32, issue 3, 559-569

Abstract: Many health risks are ambiguous in the sense that reliable and credible information about these risks is unavailable. In health economics, ambiguity is usually handled through sensitivity analysis, which implicitly assumes that people are neutral towards ambiguity. However, empirical evidence suggests that people are averse to ambiguity and react strongly to it. This paper studies the effects of ambiguity aversion on two classical medical decision problems. If there is ambiguity regarding the diagnosis of a patient, ambiguity aversion increases the decision maker's propensity to opt for treatment. On the other hand, in the case of ambiguity regarding the effects of treatment, ambiguity aversion leads to a reduction in the propensity to choose treatment.

Keywords: Ambiguity aversion; Diagnostic ambiguity; Therapeutic ambiguity; Smooth ambiguity model; Prospect theory (search for similar items in EconPapers)
JEL-codes: D81 I10 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Working Paper: Treatment decisions under ambiguity (2013)
Working Paper: Treatment decisions under ambiguity (2013)
Working Paper: Treatment decisions under ambiguity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:32:y:2013:i:3:p:559-569

DOI: 10.1016/j.jhealeco.2013.02.001

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