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Randomness beliefs and decisions on risky medical treatments

Author

Listed:
  • José Antonio Robles-Zurita

    () (Department of Economics, Universidad Pablo de Olavide)

  • José Luis Pinto-Prades

    () (Yunus Centre for Social Business and Health, Glasgow Caledonian University, and Department of Economics, Universidad Pablo de Olavide)

Abstract

Theoretical predictions entails that subjective beliefs of randomness affect the aggregation of medical outcomes of multiple-play medical treatments. Particularly, those who believe in more repetition of random events would tend to believe that multiple-play treatments are riskier medical interventions. As a consequence the level of repetition bias could reduce (increase) the willingness to accept or recommend multiple-play medical treatments if people are risk averse (risk prone). On the contrary, the repetition bias is expected to not affect single-play treatments. In an experiment we find evidence for these theoretical predictions by exploiting the between individual variation in the repetition bias for risk averse and risk prone subjects and by analysing hypothetical decisions of the Spanish general population for medical treatments in single and multiple-play scenarios. Consequences for individual decision making in the health context are considered as well as for the interpretation of the differences between single vs. multiple play treatments in previous studies.

Suggested Citation

  • José Antonio Robles-Zurita & José Luis Pinto-Prades, 2015. "Randomness beliefs and decisions on risky medical treatments," Working Papers 15.16, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:15.16
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    References listed on IDEAS

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    1. Uri Gneezy & Jan Potters, 1997. "An Experiment on Risk Taking and Evaluation Periods," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 631-645.
    2. Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
    3. Richard H. Thaler & Amos Tversky & Daniel Kahneman & Alan Schwartz, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 647-661.
    4. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 73-92.
    5. Michael L. DeKay & John C. Hershey & Mark D. Spranca, & Peter A. Ubel & David A. Asch, 2006. "Are medical treatments for individuals and groups like single-play and multiple-play gambles?," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 134-145, November.
    6. Shlomo Benartzi & Richard H. Thaler, 1999. "Risk Aversion or Myopia? Choices in Repeated Gambles and Retirement Investments," Management Science, INFORMS, vol. 45(3), pages 364-381, March.
    7. Matthew Rabin, 2002. "Inference by Believers in the Law of Small Numbers," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 775-816.
    8. Alexander Klos & Elke U. Weber & Martin Weber, 2005. "Investment Decisions and Time Horizon: Risk Perception and Risk Behavior in Repeated Gambles," Management Science, INFORMS, vol. 51(12), pages 1777-1790, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    medical treatments; single-play; multiple-play; repetition bias; alternation bias.;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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