6.) Making healthcare decisions Flashcards
What is the main problem of making decisions in healthcare?
Health is uncertain, consumers often misjudge probabilities in healthcare. They often do not follow the Expected Utility Hypothesis when making decisions. They are also limited in time and information
What is the certainty effect?
There is a tendency to value lotteries with a certain outcome (p=1) over those with uncertain outcomes even more than would be predicted based on risk aversion in EUH.
How do people view probabilities?
Overweight very low probabilities and underweight medium and high probabilities.
What is framing?
Framing is the way certain lotteries are set up to the consumer - are they shown as a loss or gain.
What is loss aversion?
A tendency for people to be risk-averse with respect to gains and risk-seeking with respect to losses, and to value the same quantity of income more when it is framed as a loss than as a gain.
What is the endowment effect?
The tendency of people to attach a greater value to a loss of a given amount than to an equivalent gain
What is Prospect Theory?
It models decision making under uncertainty through the editing stage where people perceive and organise events to simplify and the evaluation phase where the edited options are assessed against each other and the highest value prospect is chosen.
