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ESTIMATING THE HETEROGENEOUS WELFARE EFFECTS OF CHOICE ARCHITECTURE
Author(s) -
Ketcham Jonathan D.,
Kuminoff Nicolai V.,
Powers Christopher A.
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12382
Subject(s) - proxy (statistics) , choice architecture , default , welfare , business , architecture , benchmark (surveying) , actuarial science , medicare part d , prescription drug , public economics , economics , medical prescription , computer science , finance , microeconomics , medicine , machine learning , pharmacology , market economy , art , geodesy , geography , visual arts
We develop a method that embeds signals about consumers’ knowledge to evaluate prospective choice architecture policies. We analyze three proposals for U.S. Medicare prescription drug insurance markets: (i) menu restrictions, (ii) personalized information, and (iii) defaulting consumers to cheap plans. We link administrative and survey data to identify informed enrollment decisions that proxy for preferences of observationally similar misinformed consumers. Results suggest that each policy yields winners and losers, with the menu restrictions harmful to most but personalized information beneficial to most. These results are robust across signals of consumers’ knowledge but differ from the benchmark that excludes such signals.