Unobserved Heterogeneity, State Dependence, and Health Plan Choices

Ariel Pakes, Jack R. Porter, Mark Shepard and Sophie Calder-Wang

No 29025, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a new method to analyze discrete choice models with state dependence and individual-by-product fixed effects and use it to analyze consumer choices in a policy-relevant environment (a subsidized health insurance exchange). Moment inequalities are used to infer state dependence from consumers’ switching choices in response to changes in product attributes. We infer much smaller switching costs on the health insurance exchange than is inferred from standard logit and/or random effects methods. A counterfactual policy evaluation illustrates that the policy implications of this difference can be substantive.

JEL-codes: C13 D12 I11 L60 M31 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-com, nep-dcm, nep-hea, nep-ias, nep-isf and nep-reg
Note: EH IO PE
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