On the value of information: Why people reject medical tests

We use a model of reference-dependent preferences proposed by Kőszegi and Rabin (2009) to derive the value of information when a decision-maker is loss averse over changes in beliefs. This allows to model the anticipation of potential disappointment when receiving bad news. We show that this emotional impact depends on whether information is instrumental, i.e. whether it affects the decision about a subsequent action. The desirability of information in emotional terms can thus not be analyzed separately from its desirability in material terms. We apply the model to a patient's choice problem to undergo medical screening. The availability of effective cure and the timing of testing are predicted to be significant determinants of test uptake. This is in line with empirical research concerning patients' motives to decline testing.