Citation:
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Abstract:
The placebo effect, used today as the benchmark to evaluate treatment efficacy, plays a major functional role in traditional medical practices. To better understand its effect at the population level, I use a formal approach to examine the population dynamics of the placebo effect and show a reciprocal causal relationship between belief and efficacy: belief in the efficacy of treatments enhances their realized efficacy, which in turn increases people’s confidence in their therapeutic power. A unique equilibrium for subjective belief and realized efficacy always exists. Its magnitude depends on how beliefs are constructed (relative weight on observed action vs. observed outcome). I further investigate how the placebo effect affects the maintenance of existing medical technologies and the invasion of new technologies by explicitly modeling a belief construction process. Analytical and simulation results show that although the placebo effect primarily suppresses the spread of new technologies, it may occasionally enhance the adoption of superior technological variants under specific parameter combinations.