Optimal revelation of life-changing information

Nikolaus Schweizer, Nora Szech

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Information about the future may be instrumentally useful, yet scary. For example, many patients shy away from precise genetic tests about their dispositions for severe diseases. They are afraid that a bad test result could render them desperate due to anticipatory feelings. We show that partially revealing tests are typically optimal when anticipatory utility interacts with an instrumental need for information. The same result emerges when patients rely on probability weighting. Optimal tests provide only two signals, which renders them easily implementable. While the good signal is typically precise, the bad one remains coarse. This way, patients have a substantial chance to learn that they are free of the genetic risk in question. Yet even if the test outcome is bad, they do not end in a situation of no hope.
Original languageEnglish
Pages (from-to)5250-5262
JournalManagement Science
Volume64
Issue number11
DOIs
Publication statusPublished - Nov 2018

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Optimal test
Disposition
Probability weighting

Keywords

  • test design
  • revelation of information
  • design of beliefs
  • medical tests
  • anticipatory utility
  • Huntington's disease

Cite this

Schweizer, Nikolaus ; Szech, Nora. / Optimal revelation of life-changing information. In: Management Science. 2018 ; Vol. 64, No. 11. pp. 5250-5262.
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Optimal revelation of life-changing information. / Schweizer, Nikolaus; Szech, Nora.

In: Management Science, Vol. 64, No. 11, 11.2018, p. 5250-5262.

Research output: Contribution to journalArticleScientificpeer-review

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