Under Medicare Part D, senior citizens choose prescription drug insurance offered by numerous private insurers. We examine nonpoor enrollees' actions in 2006 and 2007 using panel data. Our sample reduced overspending by $298 on average, with gains by 81 percent of them. The greatest improvements were by those who overspent most in 2006 and by those who switched plans. Decisions to switch depended on individuals' overspending in 2006 and on individual-specific effects of changes in their current plans. The oldest consumers and those initiating medications for Alzheimer's disease improved by more than average, suggesting that real-world institutions help overcome cognitive limitations. (JEL D14, G22, H51, I13, I18)

It is commonly believed that consumers make frequent mistakes when subscribing to telephone calling plans. The fact that consumers show a strong preference for flat rate options has been frequently interpreted as evidence of irrational behavior. Such a choice is generally thought not to be cost minimizing ex-post. My results, obtained using data from the 1986 Kentucky tariff experiment, contradict these views and provide strong evidence in favor of the rationality of consumers' choices. I find that expectations regarding future consumption play an important role in the choice of calling plan. But more importantly, the evidence shows that there exist important learning effects that induce consumers to switch plans. Switching occurs in order to minimize the magnitude of monthly bills even in the short term and in response to very small differences in cost. JEL: D42, D82, L96.

We present an econometrically feasible model that uses the information contained in the innovation profile of each firm to test for the existence of complementarity among production and innovation strategies. Our approach is able to distinguish between complementarity and correlation induced by unobserved heterogeneity. We apply the model to analyze the Spanish ceramic tiles industry where the adoption of the single firing furnace in the 1980s facilitated the introduction of new product designs as well as to opening new ways of organizing production. Our econometric results show that there is significant complementarity between product and process innovation. Small firms tend to be more innovative overall.

In this paper, I study the theoretical and econometric implications of agents' uncertainty concerning their future consumption when a monopolist offers them either a unique, mandatory nonlinear tariff or a choice in advance from a menu of optional two-part tariffs. Agents' uncertainty is resolved through individual and privately known shocks to their types. In such a situation the principal may screen agents according to their ex ante or ex post type, by offering either a menu of optional tariffs or a standard nonlinear schedule. The theoretical implications of the model are used to evaluate a tariff experiment run by South Central Bell in two cities in Kentucky in 1986. The empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the monopolist, leading to different, nested, econometric specifications under symmetric and asymmetric information. The empirical evidence suggests that there exists a significant asymmetry of information between consumers and the monopolist under both tariff regimes. All expected welfare components failed to increase with the introduction of optional tariffs for the estimated value of the parameters.