AbstractLivestock productivity and profitability are threatened by livestock diseases. In this study, we examine farmers' revealed preferences for testing and treating gastrointestinal parasites in sheep in Sweden, taking into account the sequential structure of these decisions. We control for preventive measures, as well as the potential impact of wildlife–livestock disease transmission on farmers' decisions. A zero‐inflated ordered probit model is used to estimate the determinants of farmers' decisions, and we cross‐validate the robustness of the results to alternative model assumptions. Results from the regressions are used to calculate the consequences of these choices for farmers' profits. The results show that treatment decisions are informed by faecal testing, while both testing and treatment are influenced by the grazing practices, the size of the operation and access to information. Contrary to expectations from the conceptual framework, preventive management practices are positively correlated with treatment. Farmers take multiple risk factors into account when deciding on testing, but we do not find that the same factors affect the outcome of treatment. The economic impacts are small and suggest that treatment without prior testing is more profitable for the farmer than informed treatment. If widespread treatment increases drug resistance, this could motivate policies that encourage testing.