Estimating the Heterogeneous Welfare Effects of Choice Architecture

38 Pages Posted: 22 May 2020

See all articles by Jonathan Ketcham

Jonathan Ketcham

Arizona State University (ASU) - Marketing Department

Nicolai Kuminoff

Arizona State University (ASU) - Economics Department

Christopher Powers

Centers for Medicare and Medicaid Services

Date Written: August 2019

Abstract

We develop a method that embeds signals about consumers’ knowledge to evaluate prospective choice architecture policies. We analyze three proposals for U.S. Medicare prescription drug insurance markets: (i) menu restrictions, (ii) personalized information, and (iii) defaulting consumers to cheap plans. We link administrative and survey data to identify informed enrollment decisions that proxy for preferences of observationally similar misinformed consumers. Results suggest that each policy yields winners and losers, with the menu restrictions harmful to most but personalized information beneficial to most. These results are robust across signals of consumers’ knowledge but differ from the benchmark that excludes such signals.

Suggested Citation

Ketcham, Jonathan D. and Kuminoff, Nicolai and Powers, Christopher, Estimating the Heterogeneous Welfare Effects of Choice Architecture (August 2019). International Economic Review, Vol. 60, Issue 3, pp. 1171-1208, 2019, Available at SSRN: https://ssrn.com/abstract=3602076 or http://dx.doi.org/10.1111/iere.12382

Jonathan D. Ketcham (Contact Author)

Arizona State University (ASU) - Marketing Department ( email )

Tempe, AZ 85287-4106
United States
4809655507 (Phone)

HOME PAGE: http://wpcarey.asu.edu/directory/people/profile.cfm?person=2179827

Nicolai Kuminoff

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

Christopher Powers

Centers for Medicare and Medicaid Services ( email )

Building South, Room S3-09-2
Mail Stop S3-02-01
Baltimore, MD 21244-1850
United States

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