American Economic Review Vol. 106 No. 8 2016

Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance

Jason Abaluck¹; Jonathan Gruber²

¹ Yale School of Management–Economics, 165 Whitney Avenue, New Haven, CT 06520, and NBER (e-mail: ) · ² Department of Economics, MIT, 77 Massachusetts Avenue, E52-434, Cambridge, MA 02139, and NBER (e-mail: )

Abstract

We study choice over prescription insurance plans by the elderly using government administrative data to evaluate how these choices evolve over time. We find large "foregone savings" from not choosing the lowest cost plan that has grown over time. We develop a structural framework to decompose the changes in "foregone welfare" from inconsistent choices into choice set changes and choice function changes from a fixed choice set. We find that foregone welfare increases over time due primarily to changes in plan characteristics such as premiums and out-of-pocket costs; we estimate little learning at either the individual or cohort level.

DOI

10.1257/aer.20130778

Volume

106

Issue

8

Pages

2145-2184

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓