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Regret-sensitive treatment decisions

Author

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  • Yoichiro Fujii

    (Osaka Sangyo University)

  • Yusuke Osaki

    (Waseda University)

Abstract

The threshold approach to medical decision-making, in which treatment decisions are made based on whether the probability of sickness exceeds a predetermined threshold, was introduced by (Pauker and Kassirer, N Engl J Med 293:229-234, 1975) and (Pauker and Kassirer, N Engl J Med 302:1109-1116, 1980). This study generalizes the threshold approach using regret theory. Regret theory is one of the established alternatives to expected utility theory (EUT), and partly overcomes the descriptive limitations of EUT. Under regret theory, agents suffer disutility from regret or enjoy utility from rejoicing by comparing the chosen alternative with the forgone one. We examine the effect of regret and rejoicing on the threshold approach by setting the EU case as a benchmark, and show conditions under which regret and rejoicing monotonically change the threshold probability. The threshold probability is lowered by regret and rejoicing under the reasonable condition in the sense that the condition can explain observed choices that EU fails to describe. This suggests that agents opt to undergo medical treatment by the feeling of regret and rejoicing. This result might explain the social problems that occur in relation to the public provision of medical services in many OECD countries such as medical expenditure rising faster than government forecasts. The results also imply that regret sensitivity might cause inequality of benefits from public medical services. Finally, we offer a solution to this problem.

Suggested Citation

  • Yoichiro Fujii & Yusuke Osaki, 2018. "Regret-sensitive treatment decisions," Health Economics Review, Springer, vol. 8(1), pages 1-8, December.
  • Handle: RePEc:spr:hecrev:v:8:y:2018:i:1:d:10.1186_s13561-018-0198-2
    DOI: 10.1186/s13561-018-0198-2
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    References listed on IDEAS

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    1. Stefan Felder & Thomas Mayrhofer, 2011. "Medical Decision Making," Springer Books, Springer, number 978-3-642-18330-0, July.
    2. Han Bleichrodt & Alessandra Cillo & Enrico Diecidue, 2010. "A Quantitative Measurement of Regret Theory," Management Science, INFORMS, vol. 56(1), pages 161-175, January.
    3. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    4. Felder, Stefan & Mayrhofer, Thomas, 2011. "Higher-Order Risk Preferences – Consequences for Test and Treatment Thresholds and Optimal Cutoffs," Ruhr Economic Papers 287, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    Cited by:

    1. Fujii, Yoichiro & Nakamura, Yutaka, 2021. "Regret-sensitive equity premium," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 302-307.
    2. Yoichiro Fujii & Hajime Murakami & Yutaka Nakamura & Kazuhisa Takemura, 2023. "Multiattribute regret: theory and experimental study," Theory and Decision, Springer, vol. 95(4), pages 623-662, November.

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