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;
JEL codes
- D81: Criteria for Decision-Making under Risk and Uncertainty
- L10: General
Reference
Loïc Berger, Han Bleichrodt, and Louis Eeckhoudt, “Treatment decisions under ambiguity”, Journal of Health Economics, vol. 32, n. 3, May 2013, pp. 226–269.
See also
Published in
Journal of Health Economics, vol. 32, n. 3, May 2013, pp. 226–269