Take-Up for Genetic Tests and Ambiguity
Posted: 4 Jun 2014
Date Written: June 3, 2014
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.
Keywords: Non-expected utility, ambiguity, genetic tests, value of information
JEL Classification: D81, D83, I12
Suggested Citation: Suggested Citation