Working Paper: CEPR ID: DP3111
Authors: Astrid Kuehn; Achim Wambach
Abstract: It is commonly observed that people refuse to obtain more detailed infor- mation about their health status, e. g. by not taking genetic tests, even if this information is costless and only disclosed to the individual. This observation is in contrast to the predictions of expected utility theory.We present a model that accounts for this phenomenon by using time- inconsistent preferences. It is shown that if people devise strategies against their inconsistency, which in line with the literature will be called will, then information about a serious illness might lead to a breakdown of will. In those cases information might have a negative value.We derive some comparative statistics results and provide empirical evidence.
Keywords: breakdown of will; genetic testing; hyperbolic discounting; time inconsistent preferences
JEL Codes: D80; I10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Information acquisition (D83) | Breakdown of will (G33) |
| Fear of positive result (D91) | Refraining from obtaining genetic tests (J17) |
| Severity of disease (I12) | Willingness to seek information (D83) |
| High ex ante probability of illness (I12) | Willingness to seek information (D83) |
| Breakdown of will (G33) | Negative value of information (D80) |