Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Wednesday, October 24, 2012

Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange

Posted by D. Daniel Sokol

Keith M. Marzilli Ericson (BU) explores Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange.

ABSTRACT: 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.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/10/consumer-inertia-and-firm-pricing-in-the-medicare-part-d-prescription-drug-insurance-exchange.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef017744d75685970d

Listed below are links to weblogs that reference Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange:

Comments

Post a comment