Can prospect theory explain risk-seeking behavior by terminally ill patients?
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Patients with life-threatening conditions sometimes appear to make risky treatment decisions as their condition declines, contradicting the risk-averse behavior predicted by expected utility theory. Prospect theory accommodates such decisions by describing how individuals evaluate outcomes relative to a reference point and how they exhibit risk-seeking behavior over losses relative to that point. The authors show that a patient's reference point for his or her health is a key factor in determining which treatment option the patient selects, and they examine under what circumstances the more risky option is selected. The authors argue that patients' reference points may take time to adjust following a change in diagnosis, with implications for predicting under what circumstances a patient may select experimental or conventional therapies or select no treatment.