Comparison Friction: Experimental Evidence from Medicare Drug Plans

Jeffrey Kling, Sendhil Mullainathan, Eldar Shafir, Lee C. Vermeulen and Marian V. Wrobel

The Quarterly Journal of Economics, 2012, vol. 127, issue 1, 199-235

Abstract: Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction--the wedge between the availability of comparative information and consumers' use of it--is inconsequential because when information is readily available, consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step--providing the information rather than having consumers actively access it--had an impact. Plan switching was 28% in the intervention group, versus 17% in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 a year among letter recipients--roughly 5% of the cost in the comparison group. Our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice. Copyright 2012, Oxford University Press.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (199)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjr055 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Comparison Friction: Experimental Evidence from Medicare Drug Plans (2011)
Working Paper: Comparison Friction: Experimental Evidence from Medicare Drug Plans
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:127:y:2012:i:1:p:199-235

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().