Learning and the Value of Information: Evidence From Health Plan Report Cards
AbstractWe estimate a Bayesian learning model in order to assess the value of health plan performance information and the extent to which the explicit provision of information about product quality alters consumer behavior. We take advantage of a natural experiment in which health plan performance information for HMOs was released to employees of a Fortune 50 company for the first time. Our empirical work indicates that the release of information had a small but statistically significant effect on health plan choices, causing 3.1% of employees to switch health plans. Although consumers were willing to pay an extra $267 per year per below average rating avoided, the average value of the information per employee was only $10 per year. The relatively small impact of the ratings arises because the ratings were estimated to be very imprecise measures of quality. More precise measures of quality could have been more valuable.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8589.
Date of creation: Nov 2001
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Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-21 (All new papers)
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