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Risk aversion and the value of diagnostic tests

Author

Listed:
  • Han Bleichrodt

    (Erasmus School of Economics
    Australian National University)

  • David Crainich

    (Univ. Lille, UMR 9221 - LEM)

  • Louis Eeckhoudt

    (UMR 9221 - LEM)

  • Nicolas Treich

    (University Toulouse Capitole)

Abstract

Diagnostic tests allow better informed medical decisions when there is uncertainty about a patient’s health status and, therefore, about the desirability to undertake treatment. This paper studies the relation between the expected value of diagnostic information and a patient's risk aversion. We show that the ex ante value of diagnostic information increases with risk aversion for diseases with low prevalence, but decreases with risk aversion for diseases with high prevalence. On the other hand, the ex post value of diagnostic information always increases with the patient's degree of risk aversion.

Suggested Citation

  • Han Bleichrodt & David Crainich & Louis Eeckhoudt & Nicolas Treich, 2020. "Risk aversion and the value of diagnostic tests," Theory and Decision, Springer, vol. 89(2), pages 137-149, September.
    • Handle: RePEc:kap:theord:v:89:y:2020:i:2:d:10.1007_s11238-020-09750-8
    DOI: 10.1007/s11238-020-09750-8
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    2. Jacob Smith, 2023. "Considering Risk Aversion in Economic Evaluation: A Rank Dependent Approach," Papers 2311.07905, arXiv.org, revised Jan 2024.

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