Decision Thresholds for Medical Tests Under Ambiguity Aversion

Abstract

We consider medical decision-making under diagnostic and therapeutic uncertainty and analyze how ambiguity aversion affects the decisions to test and treat, thereby contributing to the understanding of the observed heterogeneity of such decisions. We show that under diagnostic ambiguity (i.e., the probability of disease is ambiguous), prior testing becomes more attractive if the default option is no treatment and less so if the default option is treatment. Conversely, with therapeutic ambiguity (i.e., the probability of a successful treatment is ambiguous), ambiguity aversion reduces the tolerance toward treatment failure so that the test option is chosen at a lower probability of failure. We differentiate between conditional and unconditional ambiguity aversion and show that this differentiation has implications for the propensity to test. We conclude by discussing the normative scope of ambiguity aversion for the recommendations and decisions of regulatory bodies.