How Initial Conditions Can Have Permanent Effects: The Case of the Affordable Care Act
American Economic Journal: Economic Policy
vol. 10,
no. 4, November 2018
(pp. 302-43)
Abstract
We document that states that experienced website glitches in the ACA's first year faced higher average costs that persisted into future years. These dynamics are inconsistent with the standard strategic-pricing model, which requires non-localized common knowledge about market conditions, but are consistent with price-taking. Initial conditions can have a permanent effect—including convergence to a Pareto-dominated, stable equilibrium—under conditions that we show are plausible in this setting. Changing the fine from a fixed amount to a fraction of equilibrium prices increases the likelihood of reaching a Pareto-efficient equilibrium without increasing the equilibrium fine collected.Citation
Scheuer, Florian, and Kent Smetters. 2018. "How Initial Conditions Can Have Permanent Effects: The Case of the Affordable Care Act." American Economic Journal: Economic Policy, 10 (4): 302-43. DOI: 10.1257/pol.20140204Additional Materials
JEL Classification
- H51 National Government Expenditures and Health
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
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