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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Aurora García-Gallego & Nikolaos Georgantzis & Gianandrea Staffiero & Tarek Jaber-López, 2013. "An experimental study on the effects of co-payment in public services," Working Papers 2013/03, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2013/03
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    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, pages 1-17.
    2. 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 251-277, June.
    3. 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 746-755, September.
    4. 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.
    5. Cardenas, Juan-Camilo & Ostrom, Elinor, 2004. "What do people bring into the game? Experiments in the field about cooperation in the commons," Agricultural Systems, Elsevier, vol. 82(3), pages 307-326, December.
    6. 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.
    7. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124-124.
    8. 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.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Common-Pool Resources; Co-Payment; Public Goods; Consumer Choice;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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