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Treatment decisions under ambiguity

Author

Listed:
  • BERGER, Loïc
  • BLEICHRODT, Han
  • EECKHOUDT, Louis

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.
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Suggested Citation

  • BERGER, Loïc & BLEICHRODT, Han & EECKHOUDT, Louis, 2013. "Treatment decisions under ambiguity," LIDAM Reprints CORE 2494, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2494
    Note: In : Journal of Health Economics, 32(3), 559-569, 2013
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I10 - Health, Education, and Welfare - - Health - - - General

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