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An experimental study on the effects of co-payment in public services

  • Aurora García-Gallego

    ()

    (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Nikolaos Georgantzis

    ()

    (GLOBE & Economics Department, University of Granada, Spain
    LEE & Economics Department, Universitat Jaume I, Castellón-Spain)

  • Gianandrea Staffiero

    ()

    (Center for Research in Economics and Health (CRES))

  • Tarek Jaber-López

    ()

    (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain)

We analyze the effect of imposing a charge for the individual appropriation of common resources. In our design, withdrawing the maximum amount is the dominant strategy for every player, but the resulting equilibrium is socially inefficient. We find that the presence of a price, small enough to leave intact the trade-off between individual incentives and collective welfare, is not effective in reducing appropriation among players who have previously played without it. On one hand, the upward trend in the average extraction of common funds continues after the introduction of a price. On the other hand, the presence of a price does decrease withdrawals, in comparison with a baseline treatment without any charge, as long as it is imposed from the outset. Our design sheds light on the conditions for the effectiveness of co-payment in curbing the over-consumption of public resources, most notably in the realm of healthcare.

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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2013/03.

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Length: 17 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:jau:wpaper:2013/03
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  1. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
  2. Pauly, Mark V. & Blavin, Fredric E., 2008. "Moral hazard in insurance, value-based cost sharing, and the benefits of blissful ignorance," Journal of Health Economics, Elsevier, vol. 27(6), pages 1407-1417, December.
  3. Aldo Rustichini & Uri Gneezy, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
  4. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
  5. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, vol. 87(4), pages 746-55, September.
  6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  7. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 23-39, March.
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