Ostrich Effect in Health Care Decisions: Theory and Empirical Evidence

57 Pages Posted: 15 Mar 2017

See all articles by Ksenia Panidi

Ksenia Panidi

National Research University - Higher School of Economics

Date Written: February 2015

Abstract

In this paper, I study the link between loss aversion and the frequently observed tendency to avoid useful but negative information (the ostrich effect). I construct a theoretical model showing that high loss aversion decreases the frequency of preventive testing due to the fear of a bad diagnosis. I use a representative sample of the Dutch population to provide empirical evidence supporting this prediction. The main findings confirm that loss aversion, as measured by lottery choices in terms of life expectancy, is significantly and negatively associated with the decision to participate in preventive testing for hypertension, diabetes and lung disease. Higher loss aversion also leads to lower overall frequency of testing for these illnesses.

Keywords: health anxiety, loss aversion, information aversion

JEL Classification: D80, I12

Suggested Citation

Panidi, Ksenia, Ostrich Effect in Health Care Decisions: Theory and Empirical Evidence (February 2015). Available at SSRN: https://ssrn.com/abstract=2932181 or http://dx.doi.org/10.2139/ssrn.2932181

Ksenia Panidi (Contact Author)

National Research University - Higher School of Economics ( email )

Shabolovka 26
Moscow, 119049
Russia

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