Is Zero a Special Price? Evidence from Child Health Care

Toshiaki Iizuka and Hitoshi Shigeoka

American Economic Journal: Applied Economics, 2022, vol. 14, issue 4, 381-410

Abstract: Do consumers react differently to zero prices? We test the presence of a zero-price effect in child health care and find that a zero price is special as it boosts demand discontinuously. A zero price affects resource allocations by encouraging healthier children to use more services and exacerbates behavioral hazard by increasing inappropriate use of antibiotics. A co-payment, of as small as US$2 per visit, alleviates these problems without substantially increasing financial risk. However, a zero price may be used to boost demand for highly cost-effective treatments. Zero and non-zero prices should be strategically chosen to achieve specific goals.

JEL-codes: G22 H75 I11 I13 I18 J13 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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DOI: 10.1257/app.20210184

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