Year
2008
Abstract
The United States and other nations rely on consumer choice and price competition among competing
health plans to allocate resources in the health sector. A great deal of research has examined the efficiency
consequences of adverse selection in health insurance markets, less attention has been devoted to other
aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition
in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing
adverse selection and encouraging strong price competition. We examine consumer responses to price
differences in local markets and the degree of price variation in local markets. Using both survey data
and observations on local markets we obtain evidence suggesting that as the number of choices offered
to individuals grow their willingness to switch plans given a set of price dispersion differences declines
allowing large price differences for relatively homogeneous products to persist. We consider explanations
for this phenomenon from economics and psychology.
FRANK, R. et LAMIRAUD, K. (2008). Choice, Price competition and Complexity in Markets for Health Insurance.