Take-up for genetic tests and ambiguity |
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Authors: | Michael Hoy Richard Peter Andreas Richter |
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Affiliation: | 1. Department of Economics and Finance, University of Guelph, Guelph, Canada 2. Institute for Risk Management and Insurance, Ludwig-Maximilians-Universit?t München, München, Germany
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Abstract: | Under the expected utility hypothesis a costless genetic test has, at worst, zero private value. This happens if it does not affect optimal decisions. If the genetic test facilitates better decision-making for at least one possible test outcome, then it has positive private value. This theoretical result seems to contradict the fact that empirically observed take-up rates for genetic tests are surprisingly low. We demonstrate that if individuals display ambiguity aversion, a costless genetic test that does not affect optimal decisions is never taken. Furthermore, there is a trade-off between aversion against uncertainty of test results and utility gains from better decision-making if optimal decisions depend on the level of information. The reason is that, from an ex-ante view, a genetic test introduces uncertainty of probabilities which diminishes the value of information to an ambiguity-averse decision-maker. Ambiguity aversion regarding test results thus provides an explanation for low take-up rates for genetic tests. |
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