How Do Humans Interact with Algorithms? Experimental Evidence from Health Insurance

53 Pages Posted: 26 Jun 2019

See all articles by M. Kate Bundorf

M. Kate Bundorf

Stanford University - Department of Health Research and Policy; National Bureau of Economic Research (NBER)

Maria Polyakova

Stanford University - Department of Health Research and Policy; National Bureau of Economic Research (NBER)

Ming Tai-Seale

University of California San Diego

Date Written: June 2019

Abstract

Algorithms increasingly assist consumers in making their purchase decisions across a variety of markets; yet little is known about how humans interact with algorithmic advice. We examine how algorithmic, personalized information affects consumer choice among complex financial products using data from a randomized, controlled trial of decision support software for choosing health insurance plans. The intervention significantly increased plan switching, cost savings, time spent choosing a plan, and choice process satisfaction, particularly when individuals were exposed to an algorithmic expert recommendation. We document systematic selection - individuals who would have responded to treatment the most were the least likely to participate. A model of consumer decision-making suggests that our intervention affected consumers’ signals about both product features (learning) and utility weights (interpretation).

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Suggested Citation

Bundorf, M. Kate and Polyakova, Maria and Tai-Seale, Ming, How Do Humans Interact with Algorithms? Experimental Evidence from Health Insurance (June 2019). NBER Working Paper No. w25976. Available at SSRN: https://ssrn.com/abstract=3408908

M. Kate Bundorf (Contact Author)

Stanford University - Department of Health Research and Policy ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Maria Polyakova

Stanford University - Department of Health Research and Policy ( email )

Redwood Building, T111
150 Governor's Lane
Stanford, CA 94305
United States

HOME PAGE: http://web.stanford.edu/~mpolyak/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ming Tai-Seale

University of California San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093
United States

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