Is Zero a Special Price? Evidence from Child Healthcare

52 Pages Posted: 13 Dec 2018 Last revised: 24 Oct 2020

See all articles by Toshiaki Iizuka

Toshiaki Iizuka

University of Tokyo

Hitoshi Shigeoka

Simon Fraser University (SFU); National Bureau of Economic Research (NBER); The University of Tokyo - University of Tokyo, Graduate School of Public Policy

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2020

Abstract

Do consumers react differently to zero prices? We test the presence of a zero-price effect in child healthcare and find that a zero price is indeed special and it boosts demand discontinuously. A zero price affects resource allocations by encouraging healthier children to use more services and exacerbates behavioral hazard by increasing inappropriate use of antibiotics. A copayment, as small as 2USD per visit, alleviates these problems without increasing financial and health risks. However, a zero price may be used to boost demand for highly cost-effective treatments. Strategically choosing zero and non-zero prices is a key to improving welfare.

Keywords: Zero-price Effects, Patient Cost-Sharing, Children, Healthcare Utilization, Price Elasticity, Moral Hazard

JEL Classification: I18, I13, I11, J13

Suggested Citation

Iizuka, Toshiaki and Shigeoka, Hitoshi, Is Zero a Special Price? Evidence from Child Healthcare (September 24, 2020). Available at SSRN: https://ssrn.com/abstract=3287571 or http://dx.doi.org/10.2139/ssrn.3287571

Toshiaki Iizuka

University of Tokyo ( email )

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Hitoshi Shigeoka (Contact Author)

Simon Fraser University (SFU) ( email )

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