60 Pages Posted: 6 Jul 2016 Last revised: 6 Sep 2017
Date Written: July 1, 2016
Empirical evidence, and the emergence of direct-to-consumer markets for genetic and medical tests, indicate that there is a disconnect between the testing preferences of doctors and patients. To gain insight into this dichotomy, we contrast the testing preferences implied by a normative (expected utility) model with those implied by a behavioral (prospect theory) model that accounts for anticipated emotions (e.g., rejoicing and misery) and probability distortions. Among other ndings, we isolate a reassurance eect" whereby patients will want to test more for severe, hard-to-treat diseases that have a lower probability of occurrence. We also show that probability distortions (as conventionally captured by an inverse S-shaped transformation function) tend to decrease the discrepancy between the testing preferences of doctors and patients. Our analysis also suggests product and promotional tactics for firms operating in the direct-to-consumer testing market. For example, these firms might benefitt from introducing less reliable tests (with higher probability of false negative) for severe and less treatable diseases. By highlighting the potential for such manipulative tactics, this research can support further ethical and regulatory discussions.
Keywords: genetic test, medical test, anticipated emotion, probability transformation, prospect theory, reassurance effect
Suggested Citation: Suggested Citation
Somasundaram, Jeeva and Wathieu, Luc, Demand for Genetic and Medical Testing: The Role of Anticipatory Emotions and Probability Distortion (July 1, 2016). Georgetown McDonough School of Business Research Paper No. 2803751; INSEAD Working Paper No. 2016/50/DSC. Available at SSRN: https://ssrn.com/abstract=2803751