Abstract
In most medical decisions, probabilities are ambiguous and not objectively known. Empirical evidence suggests that people's preferences are affected by ambiguity. Health economic analyses generally ignore ambiguity preferences and assume that they are the same as preferences under risk. We show how health preferences can be measured under ambiguity, and we compare them with health preferences under risk. We assume a general ambiguity model that includes many of the ambiguity models that have been proposed in the literature. For health gains, ambiguity preferences and risk preferences were indeed the same. For health losses, they differed with subjects being more pessimistic in decision under ambiguity. Utility and loss aversion were the same for risk and ambiguity. Our results imply that reducing the clinical ambiguity of health losses has more impact than reducing the ambiguity of health gains, that utilities elicited with known probabilities may not carry over to an ambiguous setting, and that ambiguity aversion may impact value of information analyses if losses are involved. These findings are highly relevant for medical decision making, because most medical interventions involve losses.
Highlights
In the early 1990s Pauker and Kopelman wrote a series of articles in the NewEngland Journal of Medicine about cases in clinical decision making (e.g. Pauker and Kopelman, 1992a; Pauker and Kopelman, 1992b; Pauker and Kopelman, 1993; Pauker and Kopelman, 1994a; Pauker and Kopelman, 1994b)
We found a difference in event weighting, which indicated more pessimism for ambiguity than for risk
We started with a general model that includes many of the ambiguity models that have been proposed in the literature as special cases
Summary
In the early 1990s Pauker and Kopelman wrote a series of articles in the NewEngland Journal of Medicine about cases in clinical decision making (e.g. Pauker and Kopelman, 1992a; Pauker and Kopelman, 1992b; Pauker and Kopelman, 1993; Pauker and Kopelman, 1994a; Pauker and Kopelman, 1994b). Ambiguity is common in health decision making. The decision maker has preferences over health prospects involving life duration. These preferences are denoted by the symbols ≻ , ≽ , and ∽ , which stand for strict preference, weak preference, and indifference, respectively. Health prospects are denoted xEy, signifying that the decision maker lives for x + x0 years if event E occurs and for y + x0 years otherwise. We assume that the decision maker prefers more life-years to less. This excludes health states worse than death and health states for which there is a maximal endurable time (Stalmeier et al, 2007). We will refer to xEy as an ambiguous prospect (meaning that probabilities are unknown) and to xpy as a risky prospect (meaning that probabilities are known)
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