DP3111 | Breakdown of Will and the Value of Information

Publication Date

12/12/2001

JEL Code(s)

Keyword(s)

Programme Area(s)

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.