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Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange / Keith M. Marzilli Ericson.
- Format:
- Book
- Author/Creator:
- Ericson, Keith M. Marzilli.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18359.
- NBER working paper series no. w18359
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- I use the Medicare Part D prescription drug insurance market to examine the dynamics of firm interaction with consumers on an insurance exchange. Enrollment data show that consumers face switching frictions leading to inertia in plan choice, and a regression discontinuity design indicates initial defaults have persistent effects. In the absence of commitment to future prices, theory predicts firms respond to inertia by raising prices on existing enrollees, while introducing cheaper alternative plans. The complete set of enrollment and price data from 2006 through 2010 confirms this prediction: older plans have approximately 10% higher premiums than comparable new plans.
- Notes:
- Print version record
- September 2012.
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