Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare / Toshiaki Iizuka, Hitoshi Shigeoka.

Format:

Book

Author/Creator:

Iizuka, Toshiaki.

Contributor:

National Bureau of Economic Research.

Shigeoka, Hitoshi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28057.

NBER working paper series no. w28057

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This study tests whether demand responds symmetrically to price increases and decreases--a seemingly obvious proposition under conventional demand theory that has not been rigorously tested. Exploiting rapid expansion in municipal subsidies for child healthcare in a difference-in-differences framework, we find evidence against it: when coinsurance, our price measure, increases from 0% to 30%, the demand response is more than twice that to a price decrease from 30% to 0%, a result consistent with loss aversion. This result indicates that, while economists and policymakers pay little attention, the price change direction matters, and that welfare analysis should incorporate this direction.

Notes:

Print version record

November 2020.