Treatment Decisions Under Ambiguity

Loïc Berger, Han Bleichrodt, Louis Eeckhoudt

Research output: Contribution to journalArticleAcademicpeer-review

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.
Original languageEnglish
Pages (from-to)559-569
Number of pages11
JournalJournal of Health Economics
Volume32
Issue number3
DOIs
Publication statusPublished - 2013

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