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Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare

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  • Toshiaki Iizuka
  • Hitoshi Shigeoka

Abstract

This study tests whether demand responds symmetrically to price increases and decreases—a seemingly obvious proposition under conventional demand theory that has not been rigorously tested. Exploiting rapid expansion in municipal subsidies for child healthcare in a difference-in-differences framework, we find evidence against it: when coinsurance, our price measure, increases from 0% to 30%, the demand response is more than twice that to a price decrease from 30% to 0%, a result consistent with loss aversion. This result indicates that, while economists and policymakers pay little attention, the price change direction matters, and that welfare analysis should incorporate this direction.

Suggested Citation

  • Toshiaki Iizuka & Hitoshi Shigeoka, 2020. "Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare," NBER Working Papers 28057, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28057
    Note: AG CH EH PE
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    References listed on IDEAS

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    Cited by:

    1. Drake, Coleman & Anderson, David & Cai, Sih-Ting & Sacks, Daniel W., 2023. "Financial transaction costs reduce benefit take-up evidence from zero-premium health insurance plans in Colorado," Journal of Health Economics, Elsevier, vol. 89(C).
    2. Norihiro Komura & Shun-ichiro Bessho, 2022. "The Longer-term Impact of Coinsurance for the Elderly - Evidence from High-access Case -," KIER Working Papers 1074, Kyoto University, Institute of Economic Research.

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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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