Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare

Toshiaki Iizuka and Hitoshi Shigeoka

No 28057, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study tests whether demand responds symmetrically to price increases and decreases—a seemingly obvious proposition under conventional demand theory that has not been rigorously tested. Exploiting rapid expansion in municipal subsidies for child healthcare in a difference-in-differences framework, we find evidence against it: when coinsurance, our price measure, increases from 0% to 30%, the demand response is more than twice that to a price decrease from 30% to 0%, a result consistent with loss aversion. This result indicates that, while economists and policymakers pay little attention, the price change direction matters, and that welfare analysis should incorporate this direction.

JEL-codes: I11 I13 I18 J13 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-hea, nep-ias and nep-upt
Note: AG CH EH PE
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Published as Toshiaki Iizuka & Hitoshi Shigeoka, 2023. "Asymmetric Demand Response When Prices Increase and Decrease: The Case of Child Health Care," Review of Economics and Statistics, vol 105(5), pages 1325-1333.

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Journal Article: Asymmetric Demand Response When Prices Increase and Decrease: The Case of Child Health Care (2023)
Working Paper: Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare (2021)
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