Affiliation:
1. Faculty of Economics, The University of Tokyo (email: )
2. Department of Economics, Simon Fraser University, Graduate School of Public Policy, The University of Tokyo, IZA, and NBER (email: )
Abstract
Do consumers react differently to zero prices? We test the presence of a zero-price effect in child health care and find that a zero price is special as it boosts demand discontinuously. A zero price affects resource allocations by encouraging healthier children to use more services and exacerbates behavioral hazard by increasing inappropriate use of antibiotics. A co-payment, of as small as US$2 per visit, alleviates these problems without substantially increasing financial risk. However, a zero price may be used to boost demand for highly cost-effective treatments. Zero and non-zero prices should be strategically chosen to achieve specific goals. (JEL G22, H75, I11, I13, I18, J13)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
4 articles.
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