health plan choice using a unique panel dataset of health plan choices and personal characteristics of employees at a single firm this paper provides estimates of price elasticities for health insurance plans in a managed competition setting estimated price elasticities are larger in absolute value than most previous estimates and the magnitude of the price elasticity suggests that there is a place for price competition in this market we also find evidence of transition costs in switching health plans for older and less healthy employees such differential responses to price may contribute to adverse selection in this market

managed competition and consumer price sensitivity in social health insurance this paper examines whether the introduction of managed competition in dutch social health insurance has resulted in effective price competition among insurance funds we find evidence of limited price competition which may be caused by low consumer price sensitivity using aggregate panel data from all insurance funds over the period 1996 1998 estimated premium elasticities of market share are 0 3 for compulsory coverage and 0 8 for supplementary coverage these elasticities are much smaller than in managed competition settings in us group insurance this may be explained by differences in switching experience and higher search costs associated with individual insurance

the effect of report cards on consumer choice in the health insurance market we test the effect of report cards on consumer choice in the hmo market federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996 exploiting this natural experiment we find that subjective measures of quality and coverage influence plan choices after controlling for plan premiums expected out of pocket expenses and service coverages the effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees we also find evidence that report cards increase the price elasticity of demand for health insurance

competition and price variation when consumers are loss averse we modify the salop 1979 model of price competition with differentiated products by assuming that consumers are loss averse relative to a reference point given by their recent expectations about the purchase consumers sensitivity to losses in money increases the price responsiveness of demand and hence the intensity of competition at higher relative to lower market prices reducing or eliminating price variation both within and between products when firms face common stochastic costs in any symmetric equilibrium the markup is strictly decreasing in cost even when firms face different cost distributions we identify conditions under which a focal price equilibrium where firms always charge the same focal price exists and conditions under which any equilibrium is focal

moral hazard asset price bubbles capital flows and the east asian crisis the first tests we examine the view that the recent east asian crisis was precipitated by bursting asset price bubbles which had been fuelled by strong capital inflows that were largely the result of a moral hazard problem in financial intermediation and was exacerbated by a vicious cycle of asset price deflation and incipient and actual capital flight we find evidence of stock market bubbles in all east asian economies examined although not in australia we examine various categories of capital flows to these countries and find in particular relatively high reversible components in portfolio flows to east asian economies

zero as a special price the true value of free products when faced with a choice of selecting one of several available products or possibly buying nothing according to standard theoretical perspectives people will choose the option with the highest cost benefit difference however we propose that decisions about free zero price products differ in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher we test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price in contrast with a standard cost benefit perspective in the zero price condition dramatically more participants choose the cheaper option whereas dramatically fewer participants choose the more expensive option thus people appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits after documenting this basic effect we propose and test several psychological antecedents of the effect including social norms mapping difficulty and affect affect emerges as the most likely account for the effect

how individuals choose health insurance an experimental analysis an individual choosing a health insurance policy faces a complex decision environment where a large set of alternatives differ on a variety of dimensions there is uncertainty and the choice is repeated at least once a year we study decisions and decision strategies in a laboratory experiment where we create a controlled environment that closely mirrors this setting we use an electronic information board that allows to carefully monitor the individual s decision strategy the number of alternatives switching costs and the speed at which health deteriorates are varied across treatments we find that most subjects search is based more on attributes than on policies moreover we find that an increase in the number of alternatives increases decision making time makes subjects consider a lower fraction of the available information makes it more likely that subjects will switch and decreases the quality of their decisions the introduction of positive costs of switching makes people switch less often but improves the quality of their decisions finally if health deteriorates only gradually individuals tend to stick to their current policy too long

demand for health insurance marketplace plans was highly elastic in 2014 2015 abstract a major provision of the affordable care act was the creation of health insurance marketplaces which began operating for the 2014 plan year although enrollment initially grew in these markets enrollment has fallen recently amid insurer exits and rising premiums to better understand these markets we estimate premium elasticity of demand for marketplace plans using within plan premium changes from 2014 to 2015 accounting for state specific trends and simultaneous changes in generosity our preferred estimate implies that a one percent premium increase reduces plan specific enrollment by 1 7 percent we argue that this high elasticity reflects the rapid growth and high churn in this market as well as the high degree of standardization and the availability of many close substitutes

the welfare impact of medicare hmos we estimate the welfare associated with the medicare hmo program now known as medicare choice m c we find that the creation of the m c program resulted in approximately 15 6 billion in consumer surplus and 52 billion in profits from 1993 to 2000 in 2000 dollars this program most likely generated significant net social welfare however we find that consumer surplus is geographically unevenly distributed prescription drug coverage accounts for approximately 45 of the estimated consumer surplus for 2000 consumer surplus increases in the number of plans in a county and most of the increase in welfare is due to increased premium competition

estimating labor supply and production decisions of self employed farm producers abstract this paper proposes a model oriented towards integrating farm households production and consumption decisions into a unified theoretical and econometric framework it is argued that in contrast with other forms of economic organization farm households utility and profit maximization decisions are not likely to be independent econometric estimation of a farm household model using canadian data suggests that utility and profit maximizing decisions are not indeed independent and moreover that there are significant gains in explanatory power and efficiency by estimating the consumption and production equations jointly

switching costs price sensitivity and health plan choice we investigate the extent to which sensitivity to health plan premiums differs across individuals according to characteristics related to the cost of switching plans our results indicate substantial variation in price sensitivity related to expected health care costs younger healthier employees are between two and four times more sensitive to price than employees who are older and who have been recently hospitalized or diagnosed with cancer we also find evidence of status quo bias estimated premium elasticities are significantly higher for new hires than for incumbent employees simulations combining our results with actuarial data illustrate the cost implications of risk related differences in price elasticity

price elasticity and adverse selection in the demand for supplementary health insurance probit regression estimates show the effects of the price of insurance anticipated medical expenditures and other factors on reported decisions about purchasing hypothetically offered supplementary insurance policies the demand estimates can characterize how much supplemental insurance would be purchased under different tax policies affecting health insurance purchases although eliminating the current tax subsidy to insurance is shown to decrease demand the results indicate a substantial demand for supplementary insurance even in the absence of present tax incentives however our results on adverse selection raise concerns about the potential stability of supplemental insurance markets

pricing and welfare in health plan choice premiums in health insurance markets frequently do not reflect individual differences in costs either because consumers have private information or because prices are not risk rated this creates inefficiencies when consumers self select into plans we develop a simple econometric model to study this problem and estimate it using data on small employers we find a welfare loss of 2 11 percent of coverage costs compared to what is feasible with risk rating only about one quarter of this is due to inefficiently chosen uniform contribution levels we also investigate the reclassification risk created by risk rating individual incremental premiums finding only a modest welfare cost

dominated choices and medicare advantage enrollment research in behavioral economics suggests that certain circumstances such as large numbers of complex options or revisiting prior choices can lead to decision errors this paper explores the enrollment decisions of medicare beneficiaries in the medicare advantage ma program during the time period we study 2007 2010 private fee for service pffs plans offered enhanced benefits beyond those of traditional medicare tm without any restrictions on physician networks making tm a dominated choice relative to pffs yet more than three quarters of medicare beneficiaries remained in tm during our study period we analyze the role of status quo bias in explaining this pattern of enrollment our results suggest that status quo bias plays an important role the rate of ma enrollment was significantly higher among new medicare beneficiaries than among incumbents these results illustrate the importance of the choice environment that is in place when enrollees first enter the medicare program

foreign portfolio investors before and during a crisis different categories of foreign portfolio investors in korea have differences as well as similarities in their trading behavior before and during the currency crisis first non resident institutional investors are always positive feedback traders whereas resident investors were negative feedback contrarian traders before the crisis but switch to be positive feedback traders during the crisis second individual investors herd significantly more than institutional investors non resident institutional as well individual investors herd significantly more than their resident counterparts third differences in the western and korean news coverage are correlated with differences in net selling by non resident investors relative to resident investors

when more seems like less differential price framing increases the choice share of higher priced options four experiments supported by six supplemental studies show that premium but higher priced products e g direct flights larger capacity data storage devices are more popular when the additional

an individual health plan exchange which employees would benefit and why on average us workers fortunate enough to be offered health insurance through their place of work are given a small number of choices 80 percent of firms accounting for 37 percent of workers offered only one plan in 2005 although there are merits of limited choice including lower administrative costs for sponsoring employers and better pooling of risk within a given employee population substantial consumer surplus is forgone by preventing employees from selecting plans that best suit their needs in dafny ho and varela 2010 we build a model to quantify this deadweight loss using data on plan offerings and enrollment for 800 large us firms in 139 geographic markets over the period 1998 2006 we estimate a model of consumer preferences for characteristics of health plans we use the parameters of that model to predict employee choices under different hypothetical scenarios of expanded choice assuming employers total outlays for health insurance remain constant and plans are made available to new enrollees at large group rates we quantify those gains for each employee group year we observe for example big box retailer s employees in houston in 2003 and conclude these gains are sizable compared to average premiums we estimate that employees would be willing to forgo ten to 40 percent or more of their employer subsidies for the right to apply those subsidies to the plan of their choosing with the exact magnitude depending on the demand specification as well as the definition of the expanded choice set an individual health plan exchange which employees would benefit and why

how elastic are preferences for redistribution evidence from randomized survey experiments we analyze randomized online survey experiments providing interactive customized information on us income inequality the link between top income tax rates and economic growth and the estate tax the treatment has large effects on views about inequality but only slightly moves tax and transfer policy preferences an exception is the estate tax informing respondents of the small share of decedents who pay it doubles support for it the small effects for all other policies can be partially explained by respondents low trust in government and a disconnect between concerns about social issues and the public policies meant to address them jel d31 d72 h23 h24

on crises contagion and confusion abstract since the tequila crisis of 1994 1995 the asian flu of 1997 and the russian virus of 1998 economists have been busy producing research on the subject of contagion yet few studies have examined empirically through which channels the disturbances are transmitted if there are indeed fundamental reasons for the spillovers we observe we attempt to fill this gap by analyzing how both trade links and the largely ignored financial sector links influence the pattern of fundamentals based contagion we examine the role of international bank lending the potential for cross market hedging and bilateral and third party trade in the propagation of crises

instability and volatility of capital flows to developing countries despite the recent recovery in capital flows towards developing countries some of their characteristics have generated serious problems as these flows are increasingly concentrated in a small group of emerging markets most developing countries have been facing a severe scarcity of external resources while for the minority endowed with some measure of access to international financial markets volatility and sustainability remain the key issues financial liberalisation has helped to create new channels for resource transfers from the developed world but it has also generated conditions wherein such transfers can easily be reversed with serious consequences in terms of instability the present study depicts discusses and analyses some of the issues related to capital movements between developed and developing countries section 2 is an overview of the recent controversies on external financial liberalisation section 2 is an surveys the post 1970 developments in capital inflows to developing countries their main components and their contribution to development finance section 4 examines the instability and volatility of total inflows and their components using two different statistical measures section 5 concentrates on a particular type of capital movement i e short term arbitrage seeking capital flows to emerging market economies this analysis requires specific conceptualisation definition and data generation from balance of payments statistics in section 6 a similar analysis of volatility and instability of short term inflows and outflows to emerging market economies is undertaken the penultimate section 7 discusses the policy implications of the foregoing analysis and is followed by a summary and conclusions

parametric and semiparametric modeling of the off farm labor supply of agrarian households in transition bulgaria the reaction of labor marketsto economic reforms is an important indicator of the progress of transition because of diminished government support and the breakup of state and collective enterprises labor market adjustments in the transition economies have been particularly severe in the agricultural sector thisarticle evaluatesthe off farm labor market for a sample of agrarian households in transition bulgaria we give particular attention to the distributional assumptions that underlie standard approaches to the evaluation of labor supply a variety of specification tests are considered and support for standard maximum likelihood estimates which rely on normality as a maintained hypothesis is mixed alternative semiparametric distribution free estimators are also considered the empirical results indicate that five years after the initiation of the transition off farm labor supply patterns for bulgarian agricultural households are similar to what is commonly observed in developed market economies labor supply is positively affected by factors such as education and work experience which are hypothesized to increase off farm wages social benefit programs providing monetary or in kind support payments are shown to significantly decrease off farm work copyright 2002 oxford university press

market price variation perceived price variation and consumers price search decisions for durable goods previous studies have consistently found that most consumers undertake relatively little prepurchase search for durable goods and do even less price comparison shopping despite the reported importance of price to consumers purchase decisions this article proposes and tests two possible explanations for why consumers willingness to engage in price search does not increase concomitantly with the price variation of durable goods the first potential explanation that consumers simply underestimate the market price variation was not supported the second possible explanation which builds upon weber s law of psychophysics and thaler s transaction utility theory was supported the data indicate that the psychological utility that a consumer derives from saving a fixed amount of money is inversely related to the price of the item in this case even if consumers believe that the price variation of more expensive items tends to be greater their motivation to spend time in price comparison shopping for these items may not increase as much as expected

the future of farm policy analysis a household perspective farms farmers farm families and even farm policy have changed since the new deal now it is time to bring the methods of farm policy analysis and the scope of data collection up to date agricultural economics by tradition an empirical discipline can once again offer important insights into the design implementation and effectiveness of policy to succeed in this century though requires an emphasis on understanding microeconomic behavior at the farm household level

competition leverage how the demand side affects optimal risk adjustment we study optimal risk adjustment in imperfectly competitive health insurance markets when high risk consumers are less likely to switch insurer than low risk consumers insurers then have an incentive to select even if risk adjustment perfectly corrects for cost differences to achieve first best risk adjustment should overcompensate insurers for serving high risk agents second we identify a trade off between efficiency and consumer welfare reducing the difference in risk adjustment subsidies increases consumer welfare by leveraging competition from the elastic low risk market to the less elastic high risk market third mandatory pooling can increase consumer surplus further at the cost of efficiency

price endings left digit effects and choice past research has found that changes in price endings can result in left digit effects whereby the magnitude of an item s price relative to the price of a reference product is influenced by the leftmost digits of both prices we extend this work by investigating the impact of changes in price endings and associated leftmost price digits on choice findings indicate that assigning different combinations of price endings to two products e g 2 00 and 2 99 vs 1 99 and 3 00 vs 2 00 and 3 00 can shift choice share toward the lower or higher priced alternative we also find that changes between just below e g 29 99 and 39 99 and round e g 30 00 and 40 00 pricing affect choice with just below pricing shifting share toward lower priced alternatives the latter effects are found to be moderated by price level and shopping goals a three path mediation model reveals the processes underlying the influence of price endings on choice

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

estimating price elasticities of convalescent care programmes this study is the first to estimate price elasticities of demand for convalescent care programmes in 1997 the german legislature more than doubled the daily co payments for the publicly insured from 6t o 13 the measure caused the overall demand for convalescent care treatments to fall by 20 to 25 i estimate the price elasticity for medical rehabilitation programmes aimed at preventing work disability to be about 0 3 whereas the elasticity for medical rehabilitation programmes for recovery from accidents at work lies around 0 5 the demand for preventive treatment at health spas is elastic and less than 1 how does the demand for medical care change when prices change since the early days of the profession of health economics the question of the price elasticity for health services has been central joseph p newhouse one of the founders of the field of health economics has published more than 100 articles alone on health care demand newhouse was also the leader of the rand group that designed and directed the famous rand health insurance experiment that focused on the impact of costsharing on the demand for medical care not only newhouse but also many other economists have devoted a great deal of attention to this topic

environment and development theory and international evidence the environmental effects of economic development have significant implications for a wide array of policy questions facing both low and high income countries today internationally agricultural research centers are considering how to incorporate sustainability issues into their research agendas while international lending institutions are taking a close look at the environmental consequences of industrial projects domestically the north american free trade agreement has brought the relationship between economic development and environmental quality to the forefront of u s public policy debate it is surprising that despite the postwar growth of development economics the genesis of environmental economics and the fusion of ideas from both fields into the theme of sustainable development economists have not made much progress in describing the impacts of long term economic growth on environmental quality yet a vigorous public debate has arisen between individuals who maintain that environmental degradation is a necessary outcome of economic growth and those who believe that economic growth and environmental quality go hand in hand this debate was highlighted at the 1992 united nations conference on environment and development in rio de janeiro in part this debate hinges on the properties of the aggregate demand for and supply of environmental quality if the income elasticity of demand for environmental quality or amenities is high then the increased prosperity engendered by economic growth could lead to significantly higher demand for environmental quality proponents of economic growth believe this demand will translate into a higher realized level of quality as both public and private institutions and organi

the welfare effects of restricted hospital choice in the us medical care market summary managed care health insurers in the usa restrict their enrollees choice of hospitals to within specific networks this paper considers the implications of these restrictions a three step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer the results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans a welfare analysis assuming fixed prices implies that restricting consumers choice of hospitals leads to a loss to society of approximately 1 billion per year across the 43 us markets considered this figure may be outweighed by the price reductions generated by the restriction copyright 2006 john wiley sons ltd

does price framing affect the consumer price sensitivity of health plan choice this paper provides field evidence on how price framing affects consumers decision to switch health plans in 2009 german federal regulation required insurers to express premium differences between standardized health plans in absolute euro values relative to a federal reference price rather than in percentage point payroll tax differences representative individual level panel data and aggregated health plan level panel data on the universe of health plans show that the reform strongly increased enrollees willingness to switch plans with demand elasticities increasing fourfold the salience of premium differences and the default premium are obviously key driving forces in the decision to switch insurers

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

beating irrationality does delegating to it alleviate the sunk cost effect we investigate the impact of delegating decision making to information technology it on an important human decision bias the sunk cost effect to address our research question we use a unique data set containing actual market transaction data for approximately 7 000 pay per bid auctions in contrast with the laboratory experiments of previous related studies our research presents the unique advantage of investigating the effects of it enabled automated bidding agents on the occurrence of a decision bias in real market transactions we identify normatively irrational decision scenarios and analyze consumer behavior in these situations our findings show that participants with a higher behavioral investment are more likely to violate the assumption of normative economic rationality because of the sunk cost effect more importantly we observe that the delegation of auction participation i e actual bidding to it significantly reduces the occurrence of the sunk cost effect in subsequent decisions made by the same individual we can attribute this reduction to the comparably lower behavioral investments incurred by auction participants who delegate their bidding to it in particular by mitigating different contributors of behavioral investments delegating to it reduces the likelihood of the occurrence of the sunk cost effect by more than 50 this paper was accepted by sandra slaughter information systems

joint production and pricing decisions with setup costs and capacity constraints we consider the problem of setting prices and choosing production quantities for a single product over a finite horizon for a capacity constrained manufacturer facing price sensitive demands there is a fixed cost per production run and a variable cost per unit produced both of which may vary by period we characterize properties of the optimal solution considering cases with constant and time varying capacity and with and without speculative motive for holding inventory we show that counter to intuition optimal prices may increase as the capacity increases even when capacity is constant over the horizon we also show that increases in capacity do not always exhibit diminishing marginal returns our procedure produces solutions with much higher profits than can be obtained from a sophisticated sequential procedure in which a well informed and optimum seeking marketing department makes pricing decisions and the manufacturing department seeks to satisfy the resulting demands at minimum cost our results also suggest that firms with seasonal demand and tight capacity constraints should be more aggressive in setting prices to manage their demands than what is typically done in practice finally we discuss how a decision maker can use our procedure as an aid in solving multiproduct versions of the problem

hot money accounting labels and the permanence of capital flows to developing countries an empirical investigation using maximum likelihood kalman filtering techniques and non parametric variance ratio statistics we gauge the relative importance of permanent and temporary components of capital flows to latin american and asian developing countries over the period 1988 1997 for the broad categories of flows in the capital account equity flows ef bond flows bf official flows of commercial bank credit bc and foreign direct investment fdi we find relatively low permanent components in ef bf and of while commercial bc flows appear to contain quite large permanent components and fdi flows are almost entirely permanent these results have a natural interpretation and clear policy implications

rational contagion and the globalization of securities markets this paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios in the presence of short selling constraints the gain of gathering information at a fixed cost may diminish as markets grow moreover if a portfolio manager s marginal cost for yielding below market returns exceeds the marginal gain for above market returns there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets

health insurance for humans information frictions plan choice and consumer welfare traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk in practice choosing an insurance plan is a complicated decision often made without full information in this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences information frictions and hassle costs our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates we study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro foundations for welfare analysis

family economics and macro behavior in this 1987 presidential address to the american economic association the author explores the contributions of the field of family economics to macroeconomic analysis the focus is on family behavior as an active endogenous factor that both affects and is affected by the evolution of the economy much of the time is spent on long term economic growth although i also discuss short and long cycles in economic activity and the interaction between overlapping generations through social security transmission of inequality and in other ways many conclusions in these and presumably other macro areas change radically when family choices get the attention they deserve excerpt

a model of focusing in economic choice we present a generally applicable theory of focusing based on the hypothesis that a person focuses more on and hence overweights attributes in which her options dier more our model predicts that the decisionmaker is too prone to choose options with concentrated advantages relative to alternatives but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated in intertemporal choice because the relative concentrations of an option s costs and benets can be dierent from the perspective of a single period and the perspective of the entire choice problem the decisionmaker often exhibits a form of time inconsistency she is present biased when the costs of current misbehavior are distributed over many future dates such as in harmful consumption but future biased when the benet of many

the value of consumer choice and the decline in hmo enrollments i introduction and overview health insurance contracts may restrict consumers choice of medical provider in order to minimize moral hazard for example consumers who are insured for their marginal healthcare expenses have no incentive to enforce price discipline on their own in this case insurers may impose this discipline by restricting consumers choice of medical provider to those who offer competitive prices 1 this practice known as selective contracting sc may have other benefits as well including channeling consumers to efficient providers and achieving other efficiencies associated with partial vertical integration sc has been utilized by insurers both in the united states and abroad 2 however it is not a universal feature of health insurance contracts in part this is because reducing the choice set of medical providers imposes costs on consumers to the extent that consumers assign option value to choice capps dranove and satterthwaite 2003 for example sc was widely employed in the united states by health maintenance organizations hmos and other insurers in the 1990s and appears to have been an important cost control mechanism cutler mcclellan and newhouse 2000 robinson and phibbs 1989 however most private u s health insurers moderated their use of sc during the past decade at the same time that healthcare costs accelerated anecdotally a consumer and regulatory backlash against provider choice restrictions forced insurers to expand choice and largely abandon the practice blendon et al 1998 vita 2001 simultaneously hmo enrollments declined the purpose of this article is to explore the economic tradeoffs of sc with a particular focus on directly measuring the value that consumers assign to choice in medical markets i am interested in assessing whether the magnitude of any utility loss from choice restrictions can be offset by volume based price discounts that insurers may receive from hospitals my results bear on the larger question of whether an economic linkage can be drawn between consumers demand for choice and their apparent rejection of what is called tightly managed care they also have implications for many healthcare reform proposals that necessarily imply restrictions on the consumers choice sets i analyze health plan s sc of hospitals in the state of florida between 1999 and 2003 hospital sc restricts consumer choice in multiple ways including their choice of hospital in addition hospital choice restrictions imply restrictions over the use of specific physicians 3 i start by constructing hospital networks for each of a set of plan choices and then estimate a discrete choice model of health insurance demand conditional on each plan s restricted network for these purposes i use the capps dranove and satterthwaite 2003 measure of sc disutility that focuses on the option value of choice i employ several different discrete choice estimators to estimate the model including models with plan metropolitan statistical area msa fixed effects designed to control for unobserved plan attributes this provides me with estimates of disutility resulting from choice restrictions subsequently i project the estimated plan effects onto an instrumented value of plan price in order to estimate the price elasticity and also convert my disutility estimates into dollars my results show that consumers associated restrictive hospital networks with plan disutility during each of the years of the study period with choice elasticities that range from 0 10 to 0 32 in pooled estimates greater effects are obtained in 2003 using models where i allow the estimates to vary by year using my instrumental variables methodology to recover unbiased price coefficients i show that consumers associated a one standard deviation reduction in the size of a plan s hospital network with a reduction in plan value of between 62 and 118

u s banks crises and bailouts from mexico to ltcm this paper investigates the impact on bank stock prices of emerging market currency crises and bailouts the stock market distinguishes between banks with exposure to a crisis country and other banks in general banks with exposures to a crisis country are affected adversely by currency events and positively by bailouts other banks are mostly unaffected by events in countries experiencing a crisis the paper uses the impact of the ltcm crisis on bank stock prices to put the emerging market events in perspective the ltcm crisis had no significant contagion effects in the banking sector either but banks that participated in the ltcm rescue experienced negative stock returns when the rescue was announced this abstract was borrowed from another version of this item

estimating housing consumption adjustments from panel data abstract although time series analysis of panel data has generally not been used in the study of housing demand longitudinal analysis provides the opportunity to increase our understanding of housing adjustments over time in particular time series analysis of housing choice using panel data permits appropriate use of both time series and cross sectional variation in housing prices provides the opportunity to separate age and cohort effects and facilitates integration of mobility analysis with housing choice analysis in this paper a longitudinal discrete choice model of the choice of housing tenure and size is presented and estimated using panel data this conditional fixed effects multinomial logit model developed by g chamberlain is computationally convenient and successfully accounts for time invariant differences among households while household specific unobserved characteristics can be readily accounted for in a linear model this is not the case for a quantitative choice model the use of a model of the type employed here thus provides a crucial link between time series analysis and a discrete choice setting estimation of this model yields results with respect to age and price that differ from results obtained from individual and pooled cross sections this provides support for the plausible proposition that housing choices are intertemporally correlated and more importantly emphasizes the importance of accounting for this correlation to estimate consistently the parameters of housing choice models

the welfare impact of hmo mergers abstract this paper estimates the welfare consequences of hmo mergers using data from california s small group market the analysis estimates the parameters from a differentiated products demand system the parameters are then used to simulate the effects of several hmo mergers by solving for the nash equilibrium in prices under different ownership structures even small mergers in moderately concentrated markets can result in significant consumer surplus reductions however these welfare losses can be offset by large efficiency gains the welfare consequences of hmo mergers turn less upon demand side considerations than on the health plan s ability to realize efficiencies

reference effects of price and promotion on brand choice behavior when consumers are exposed to pricing and promotional activity by frequently purchased packaged goods they may develop expectations that are used as points of reference in evaluating future activi

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

portfolio capital flows hot or cold a distinction is often made between short term and long term capital flows the former are deemed unstable hot money and the latter are deemed stable cold money using time series analysis of balance of payments data for five industrial and five developing countries we find that in most cases the labels short term and long term do not provide any information about the time series properties of the flow in particular long term flows are often as volatile as short term flows and the time it takes for an unexpected shock to a flow to die out is similar across flows long term flows are also at least as unpredictable as short term flows and knowledge of the type of flow does not improve the ability to forecast the aggregate capital account copyright 1995 by oxford university press

paying medicare advantage plans to level or tilt the playing field medicare beneficiaries are eligible for health insurance through the public option of traditional medicare tm or may join a private medicare advantage ma plan both are highly subsidized but in different ways medicare pays for most of costs directly in tm and subsidizes ma plans based on a benchmark for each beneficiary choosing a private plan the level of this benchmark is arguably the most important policy decision medicare makes about the ma program many analysts recommend equalizing medicare s subsidy across the options referred to in policy circles as a level playing field this paper studies the normative question of how to set the level of the benchmark applying the versatile model developed by einav and finkelstein ef to medicare the ef framework implies unequal subsidies to counteract risk selection across plan types we also study other reasons to tilt the field the relative efficiency of ma vs tm market power of ma plans and institutional features of the way medicare determines subsidies and premiums after review of the empirical and policy literature we conclude that in areas where the ma market is competitive the benchmark should be set below average costs in tm but in areas characterized by imperfect competition in ma it should be raised in order to offset output enrollment restrictions by plans with market power we also recommend specific modifications of medicare rules to make demand for ma more price elastic

incorporating consumer price expectations in diffusion models in this paper the sensitivity of the optimal price path of a new durable product to the price expectations of consumers is examined consumers enter the market every period in a diffusion type framework during the initial periods more consumers enter the market due to word of mouth influence but in the latter periods saturation effects set in the entering set of cohorts form expectations about future prices and in a stable equilibrium these expectations are fulfilled it is shown that the price path is cyclical with the following properties at the beginning of the cycle the price is at its highest level it falls monotonically over time reaching a low price at the end of the cycle equal to the reservation price of the consumers willing to pay less the cycle lengths are not equal the sensitivity of the optimal price path to model parameters is explored through a numerical procedure

a model of crises in emerging markets this paper presents a perfect foresight model of speculative attacks on emerging markets credit constrained governments are assumed to have two objectives to accumulate liquid assets in order to self insure against shocks to national consumption and to insure poorly regulated domestic financial markets this policy regime generates endogenous fiscal deficits defined to include the growth of contingent liabilities the model sets out a sequence of yield differentials consistent with capital inflows followed by anticipated speculative attacks the model suggests that a common shock generated capital inflows to emerging markets in asia and latin america after 1989

transfer efficiency and distributional impacts of u s farm support evidence from a macro micro simulation the objective of this analysis is to provide insight into the transfer and distributional efficiency of farm support policies a one shot macro micro simulation model weaves together the two prominent threads in the agri cultural decoupling literature that focuses for the first part on economy wide impacts and for the second on the role of cross household het erogeneity experimental shocks to output and land subsidies that generate a 1 increase in net national farm income are compared for the united states with output subsidies shown to have lower transfer efficiency but comparable distributional impact surprisingly a more cou pled approach to policy whereby some agricul tural enterprises are excluded from program participation is found to generate a stronger reduction in inequality this is partially at tributed to the inclusive definition of a farm

the off farm labor supply of farmers theoretical and empirical models are developed to examine the off farm wages labor force participation and hours of work of farmers econometric estimates use data from a 1971 survey of illinois farmers the off farm wage depends on farmer human capital and the local labor market the major result confirms the sensitivity of off farm work to economic incentives a 10 increase in the off farm wage entails an 11 increase in hours of off farm work holding farm characteristics constant results also indicate effects of seasonality risk and life cycle factors on off farm work

are farmers decisions to work off the farm related to their decisions to participate in the conservation reserve program since both working off the farm and participating in the conservation reserve program crp remove important resources from us agricultural production we utilize two econometric specifications to test hypotheses regarding whether these two decisions by farmers are independent we find statistical evidence that decisions to participate in crp and work off the farm are correlated characteristics of farm households and farm operations affect both decisions directly and indirectly as do local economic conditions and participation in other farm programs to illustrate their importance we simulate the combined direct and indirect effects of changes in decoupled payments and farm size on the probabilities of farm households engaging in these two activities we also illustrate that the probability of engaging in these two activities depends on whether the farm is located in a state or local agricultural district or participates in a related farmland retention program

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

price and the health plan choices of retirees abstract this study analyzes health plan choices of retirees in an employer sponsored health benefits program that resembles premium support models proposed for medicare in this program out of pocket premiums depend on when an individual retired and his or her years of service as of that date since this price variation is exogenous to unobserved plan attributes and retiree characteristics it is possible to obtain unbiased premium elasticity estimates the results indicate a significantly negative effect of premiums the implied elasticities are at the low end of the range found in previous studies on active employees

the falsification of four popular hypotheses about the asian crisis various claims have been made about the causes of the asian crisis and its spread here we use data on the behaviour of capital flows during the crisis to test the strong forms of four such hypotheses that portfolio investors and hedge funds played a dominant role in initiating and or spreading the crisis that moral hazard kept efficient markets from predicting the crisis and finally the common lender hypothesis of kaminsky and reinhart in the process we also test implications of the calvo mendoza model of rational investor ignorance all are falsified as monocausal explanations for example portfolio investments that could not have been subject to substantial moral hazard continued to flow into asia until very shortly before the crisis likewise banks were a much larger source of capital outflows during the crisis than were portfolio investors while falsified in their strongest forms several of these hypotheses in less strong forms should play a role in a more nuanced analysis it is necessary to move past simple single factor approaches in order to produce a more complete synthetic explanation of this episode

the effect of price on switching among health plans a recent policy change by the university of california uc provides a unique natural experiment for investigating the sensitivity of consumers to health plan premiums when the uc moved to a policy of limiting its contribution to the cost of the least expensive plan out of pocket premiums increased for roughly one third of uc employees we examine the extent to which uc employees switched plans in response to this change in premiums our results indicate a strong response individuals facing premium increases of less than 10 were roughly 5 times as likely to switch plans as those whose premiums remained constant

the elasticity of demand for health maintenance organizations this paper analyzes a national sample of firms where employees faced a choice between a health maintenance organization hmo and a conventional insurer such as blue cross a regression analysis is specified as a partial adjustment model and a logit functional form the long run price elasticity of demand for hmos is estimated to be 0 6 to the extent that employers pass on increases in the total premium the price elasticities facing insurers are higher furthermore the demand for hmos is a negative function of the copayment charged by the hmo for an office visit

distortion of price discount perceptions the right digit effect we use four experiments to examine consumers processing of comparative regular and sale price information in advertisements consistent with our hypothesized right digit effect we find that when consumers view regular and sale prices with identical left digits they perceive larger price discounts when the right digits are small i e less than 5 than when they are large i e greater than 5 as a result they may attribute greater value and increased purchase likelihood to higher priced lower discounted items we examine alternate processing explanations for this right digit effect as well as the moderating impact of price presentation format

reference dependent risk attitudes we use koszegi and rabin s 2006 model of reference dependent utility and an extension of it that applies to decisions with delayed consequences to study preferences over monetary risk because our theory equates the reference point with recent probabilistic beliefs about outcomes it predicts specific ways in which the environment influences attitudes toward modest scale risk it replicates classical prospect theory including the prediction of distaste for insuring losses when exposure to risk is a surprise but implies first order risk aversion when a risk and the possibility of insuring it are anticipated a prior expectation to take on risk decreases aversion to both the anticipated and additional risk for large scale risk the model allows for standard consumption utility to dominate reference dependent gain loss utility generating nearly identical risk aversion across situations

premium levels and demand response in health insurance relative thinking and zero price effects abstract in health care systems with a competitive health insurance market governments or other sponsors e g employers often subsidize premiums to encourage enrolment these subsidies are typically independent of plan choice leaving the absolute premium differences in place so as not to distort consumer choice of plan such subsidies do however change the relative premium differences across plans which according to theories from behavioral economics can affect choice consumers might be sensitive to differences relative to a reference premium relative thinking furthermore consumers might be particularly sensitive to a reference premium of zero zero price effect a relevant range for some subsidized health insurance markets this paper tests these ideas with two sources of evidence we argue that observed equilibria in germany and the u s medicare advantage markets are consistent with a powerful zero price effect resulting in an equilibrium focal pricing at zero this contrasts with the netherlands where equilibrium premiums are well above zero in an empirical test using hypothetical questions in a web based survey in these three countries we also find evidence for both a relative thinking and a zero price effect in the demand for health insurance our findings imply that well designed subsidies can leverage relative thinking to increase demand elasticity for health plans creation of a powerful reference price e g at zero however risks subverting price competition

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research

economic growth and low incomes in agriculture during most of the 20th century the u s farm economy generated low average incomes and a higher incidence of poverty than in the nonfarm population when president johnson s war on poverty was being waged in the 1960s one of the key areas of concentration was rural poverty spurred by estimates for example that 15 of nonfarm families but 31 of farm families were poor in addition this notwithstanding the use of a basic poverty line of 3 100 for nonfarm but only 2 200 for nonfarm families see bryant yet by 1990 farm poverty was reduced below that of the nonfarm population and the issue largely disappeared from the agenda of economists as well as politics how did this happen this paper analyzes data on low incomes among u s farm households since 1950 and investigates the reasons for improvement i focus on market integration in the process of economic growth it would seem at first glance almost tautological that economic growth would be helpful in reducing poverty this would appear to be especially true in the worldwide context where 72 of the world s poor people live in rural areas according to a world bank estimate world bank p 22 however many of the groups protesting the world trade organization wto last december in seattle and the world bank last april in washington believe that liberal trade and market oriented policies aimed at economic growth have had the effect of increasing inequality and worsening the economic situation of the poor little evidence of this was provided however and the most convincing assessments i have seen reassert the more