Search and Prices in the Medigap Insurance Market

Haizhen Lin () and Matthijs Wildenbeest

No 2013-15, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: This paper studies search and prices in the Medigap insurance market. Using data on market shares, insurer characteristics, and plan prices, we estimate to what extent prices can be explained by search and product differentiation. In our model, consumers search across Medigap insurers for prices as well as plan types. Our estimates indicate search costs are substantial: the estimated median cost of searching for an insurer is $22. Using the estimated parameters we nd that eliminating search costs could result in price decreases of as much as 5 percent, along with increases in average consumer welfare of up to $321.

Keywords: Medigap; health insurance; search; product differentiation; price dispersion (search for similar items in EconPapers)
JEL-codes: D83 I13 L15 (search for similar items in EconPapers)
Date: 2013-07
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Citations: View citations in EconPapers (3)

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