Economics Department Seminar

How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance

Sponsored by: Economics Department

Speaker(s): Amanda Starc, Ph.D., Wharton School, University of Pennsylvania

Date & Time: Thursday, Sep. 19, 2013 from 4:15 p.m. to 5:45 p.m.

Please join the Economics Department for a research seminar.  This event is open to all Case Western Reserve University  faculty, Ph.D. students, economic majors and minors, and those interested in economics research.  Abstract is below.
 
Contact Information:
Teresa Kabat
teresa.kabat@case.edu
216.368.4110
 

Standardization of complex products is touted as improving consumer decisions
and intensifying price competition, but evidence on standardization is limited. We
examine a natural experiment with health insurance plans on the Massachusetts Health
Insurance Exchange. Pre-standardization, ?rms had wide latitude to design plans. A
regulatory change then required ?rms to standardize the cost-sharing parameters of
plans and o¤er seven de?ned options; plans remained di¤erentiated on network, brand,
and price. Post-standardization, consumers shifted to relatively more generous health
insurance plans. A discrete choice model shows that this shift is explained by changes
in consumer valuation of plan attributes, rather than changes in product availability.
Standardization increased welfare in our models, but counterfactual exercises show
that ?rms captured some of the surplus by reoptimizing premiums. Finally, we use
hypothetical choice experiments to replicate the e¤ect of standardization and conduct
alternative counterfactuals.

Location
Peter B. Lewis Building, Room 202
11119 Bellflower Road
Cleveland, OH 44106-7235
United States