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Is Zero a Special Price? Evidence from Child Healthcare

Author

Listed:
  • Toshiaki Iizuka

    (The University of Tokyo)

  • Hitoshi Shigeoka

    (Simon Fraser University and NBER)

Abstract

Do consumers react differently to zero prices? We test the presence of a zero-price effect in child healthcare and find that a zero price is indeed special and 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 copayment, as small as 2USD per visit, alleviates these problems without increasing financial and health risks. However, a zero price may be used to boost demand for highly cost-effective treatments. Strategically choosing zero and non-zero prices is a key to improving welfare.

Suggested Citation

  • Toshiaki Iizuka & Hitoshi Shigeoka, 2021. "Is Zero a Special Price? Evidence from Child Healthcare," Discussion Papers dp21-06, Department of Economics, Simon Fraser University.
    • Handle: RePEc:sfu:sfudps:dp21-06
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    File URL: http://www.sfu.ca/repec-econ/sfu/sfudps/dp21-06.pdf
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    Cited by:

    1. 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.
    2. Sano, Kazuaki & Miyawaki, Atsushi & Abe, Kazuhiro & Jin, Xueying & Watanabe, Taeko & Tamiya, Nanako & Kobayashi, Yasuki, 2022. "Effects of cost sharing on long-term care service utilization among home-dwelling older adults in Japan," Health Policy, Elsevier, vol. 126(12), pages 1310-1316.
    3. Shigeoka, Hitoshi & Watanabe, Yasutora, 2023. "Policy Diffusion through Elections," IZA Discussion Papers 16275, Institute of Labor Economics (IZA).
    4. Hongmei Cao & Xinpeng Xu & Hua You & Jinghong Gu & Hongyan Hu & Shan Jiang, 2022. "Healthcare Expenditures among the Elderly in China: The Role of Catastrophic Medical Insurance," IJERPH, MDPI, vol. 19(21), pages 1-20, November.
    5. 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.

    More about this item

    Keywords

    Zero-price Effects; Patient Cost-Sharing; Children; Healthcare Utilization; Price Elasticity; Moral Hazard;
    All these keywords.

    JEL classification:

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

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