Estimating the Heterogeneous Welfare Effects of Choice Architecture

Ketcham, Jonathan D.; Kuminoff, Nicolai V.; Powers, Christopher A.

doi:10.1111/iere.12382

Cited by 8 publications

(15 citation statements)

References 74 publications

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“…Most interventions proposed in behavioral economics seek to nudge consumers in line with the standard insurance model. But if the behavior predicted by the standard model is not beneficial for consumers, then behavioral interventions might induce a “welfare loss” for consumers (Handel, 2013; Ketcham et al, 2019; Marton et al, 2017). To further illustrate, we take the case of choice overload.…”

Section: Limitationsmentioning

confidence: 99%

Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review

Iyer

SMR

2022

Risk Manage Insurance Review

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This article uses the systematic scoping review method to summarize literature at the interface of behavioral economics and health insurance. We aim to offer policymakers of choice‐based health insurance markets an understanding of (a) behavioral factors that affect consumer decision‐making in health insurance markets and (b) behavioral interventions that can be used to help consumers make better health insurance decisions. In the process, we reviewed 80 studies from extant literature and found that 18 behavioral factors negatively impact three major aspects of consumer decision‐making: that is, purchasing, quality of plan choice, and switching. We also identify 17 behavioral interventions that policymakers could use to help consumers make better health insurance decisions. However, while using the findings of the field, policymakers must keep in mind that there are limitations to the generalizability of the findings coupled with limitations that behavioral economics comes along with. Based on this study, future research could focus on identifying the segments of the populous that are more likely to be affected by the behavioral factors, and what behavioral interventions can be used to help them. Future research is also needed in settings other than WEIRD (Western, Educated, Industrialized, Rich, and Democratic) nations for the benefit of policymakers of non‐WEIRD nations.

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Section: Limitationsmentioning

confidence: 99%

Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review

Iyer

SMR

2022

Risk Manage Insurance Review

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“…Our analysis allows for two sources of optimization errors: consumer misinformation about tobacco product risks (one of the product attributes) and present bias captured by the preference weights Γ i . Our calculations of the CVs that incorporate consumer optimization errors follow Leggett (2002) and Ketcham, Kuminoff and Powers (2019). 9 4 | DATA…”

Section: Welfare Expressionsmentioning

confidence: 99%

Mostly harmless regulation? Electronic cigarettes, public policy, and consumer welfare

2020

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Electronic cigarettes are a less harmful alternative to combustible cigarettes. We analyze data on e-cigarette choices in an online experimental market. Our data and mixed logit model capture two sources of consumer optimization errors: overestimates of the relative risks of e-cigarettes and present bias. Our novel data and policy analysis make three contributions. First, our predictions about e-cigarette use under counterfactual policy scenarios provide new information about current regulatory tradeoffs. Second, we provide empirical evidence about the role consumer optimization errors play in tobacco product choices. Third, we contribute to behavioral welfare analysis of policies that address individual optimization errors. Compared with standard cost-benefit analysis, our behavioral welfare economics analysis leads to much larger estimates of the costs of policies that discourage e-cigarette use or the benefits of policies that encourage e-cigarette use. K E Y W O R D S behavioral welfare analysis, consumer optimization, electronic cigarettes, electronic nicotine delivery systems, tobacco control 1 | INTRODUCTION Electronic cigarettes and other vaping devices provide users with a vapor that contains nicotine without the combustion-generated toxicants in tobacco smoke. Vaping e-cigarettes is not harmless but poses much lower risks than smoking combustible tobacco. 1 The vaping market has rapidly evolved. The first modern vaping products were introduced in U.S. markets around 2007. Annual sales grew rapidly from $500 million in 2012 to $6.6 billion in 2018 (Cowen and Company Equity Research, 2019). In 2018 data for adults, 9.7% of current smokers, 25.2% of recent (past-year) former smokers, and 4.2% of nonrecent former smokers regularly vape, compared with 1.1% of never smokers. 2 The adult current smoking rate was 19.8% in 2007 when e-cigarettes were introduced into the U.S. market and has declined to 13.7% in 2018 (American Lung Association, 2020; Creamer et al., 2019). Public policy towards vaping is also evolving. Vaping products were regulated as ordinary consumer products until 2016. In May 2016, the FDA issued a rule phasing in regulation of vaping products as tobacco products (FDA, 2016). In early 2020, the FDA announced new enforcement priorities that amount to at least a temporary ban of cartridge-based flavored e-cigarettes (other than menthol) (FDA, 2020a). In addition to the FDA, states, counties, and municipalities 1 Section 2 below provides more discussion of the evidence on the relative risks of vaping and smoking. Unless otherwise stated, we refer to the action of using e-cigarette products as vaping and the action of using any combustible tobacco product as smoking.

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“…We further investigate the process by which Medicare beneficiaries choose prescription drug plans (PDPs). The papers closest to ours are Abaluck andGruber (2011, 2016) and Ketcham et al (2016Ketcham et al ( , 2019. Abaluck and Gruber estimate multinomial logit (MNL) models for drug plan choice, focusing on whether consumers maximize a particular utility function that embeds certain theory restrictions.…”

Section: Introductionmentioning

confidence: 99%

Evaluating consumers’ choices of Medicare Part D plans: A study in behavioral welfare economics

Keane

Ketcham

Kuminoff

et al. 2021

Journal of Econometrics

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Estimating the Heterogeneous Welfare Effects of Choice Architecture

Cited by 8 publications

References 74 publications

Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review

Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review

Mostly harmless regulation? Electronic cigarettes, public policy, and consumer welfare

Evaluating consumers’ choices of Medicare Part D plans: A study in behavioral welfare economics

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