Choice Architecture for Healthier Insurance Choices: Ordering and Partitioning Can Improve Decisions

Benedict Dellaert, Eric Johnson and Tom Baker

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: Health insurance decisions are a challenge for many consumers and influence welfare, health outcomes, and longevity. Two choice architecture tools are examined that can improve these decisions: informed ordering of options (from best to worst) and choice set partitioning. It is hypothesized that these tools can improve choices by changing: (1) decision focus: the options in a set on which consumers focus their attention, and (2) decision strategy: how consumers integrate the different attributes that make up the options. The first experiment focuses on the mediating role of the hypothesized decision processes on consumer decision outcomes. The outcome results are validated further in a field study of over 40,000 consumers making actual health insurance choices and in two additional experiments. The results show that informed ordering and partitioning can reduce consumers’ mistakes by hundreds of dollars per year. They suggest that wise choice architecture interventions depend upon two factors: The quality of the user model possessed by the firm to predict consumers’ best choice and possible interactions among the ensemble of choice architecture tools.

Keywords: choice architecture; decision-making; consumer decision process; health insurance choice; consumer welfare (search for similar items in EconPapers)
Pages: 51
Date: 2019-07-01
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-hea and nep-ias
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Citations: View citations in EconPapers (1)

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