Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance

Jason Abaluck and Jonathan Gruber

American Economic Review, 2016, vol. 106, issue 8, 2145-84

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.

JEL-codes: G22 H51 I13 I18 J14 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20130778
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Citations: View citations in EconPapers (47)

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