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Risk aversion and the value of diagnostic tests

Author

Listed:
  • Hal Bleichrodt
  • David Crainich

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Louis Eeckhoudt

    (IESEG School of Management Lille)

  • Nicolas Treich

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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

  • Hal Bleichrodt & David Crainich & Louis Eeckhoudt & Nicolas Treich, 2020. "Risk aversion and the value of diagnostic tests," Post-Print hal-03048860, HAL.
    • Handle: RePEc:hal:journl:hal-03048860
    DOI: 10.1007/s11238-020-09750-8
    Note: View the original document on HAL open archive server: https://hal.science/hal-03048860
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    References listed on IDEAS

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    Cited by:

    1. Herrera-Araujo, Daniel & Rheinberger, Christoph M. & Hammitt, James K., 2022. "Valuing non-marginal changes in mortality and morbidity risk," Journal of Health Economics, Elsevier, vol. 84(C).
    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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    Keywords

    Diagnostic risks; Diagnostic tests; Value of information; Risk aversion;
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