Is Zero a Special Price? Evidence from Child Health Care
- (pp. 381-410)
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.Citation
Iizuka, Toshiaki, and Hitoshi Shigeoka. 2022. "Is Zero a Special Price? Evidence from Child Health Care." American Economic Journal: Applied Economics, 14 (4): 381-410. DOI: 10.1257/app.20210184Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I11 Analysis of Health Care Markets
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- J13 Fertility; Family Planning; Child Care; Children; Youth
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