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On Inferring Demand for Health Care in the Presence of Anchoring, Acquiescence, and Selection Biases

  • Jay Bhattacharya
  • Adam Isen
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    In the contingent valuation literature, both anchoring and acquiescence biases pose problems when using an iterative bidding game to infer willingness to pay. Anchoring bias occurs when the willingness to pay estimate is sensitive to the initially presented starting value. Acquiescence bias occurs when survey respondents exhibit a tendency to answer 'yes' to questions, regardless of their true preferences. More generally, whenever a survey format is used and not all of those contacted participate, selection bias raises concerns about the representativeness of the sample. In this paper, we estimate students' willingness to pay for student health care at Stanford University while accounting for all of these biases. As there is no cost sharing for students, we assess willingness to pay by having a random sample of students play an online iterative bidding game. Our main results are that (1) demand for student health care is elastic by conventional standards; (2) ignoring anchoring bias would lead to a substantially biased measure of the demand elasticity; (3) there is evidence for acquiescence bias in student answers to the opening question of the iterative bidding game and failure to address this leads to the biased conclusion that demand is inelastic; and (4) standard selection correction methods indicate no bias from selective non-response and newer bounding methods support this conclusion of elastic demand.

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    File URL: http://www.nber.org/papers/w13865.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13865.

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    Date of creation: Mar 2008
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    Publication status: published as Jay Bhattacharya & Adam Isen, 2009. "On Inferring Demand for Health Care in the Presence of Anchoring and Selection Biases," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 12(2).
    Handle: RePEc:nbr:nberwo:13865
    Note: HC HE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Arthur van Soest & Michael Hurd, 2003. "A Test for Anchoring and Yea-Saying in Experimental Consumption Data," Working Papers 147, RAND Corporation Publications Department.
    2. Charles F. Manski & John V. Pepper, 2000. "Monotone Instrumental Variables, with an Application to the Returns to Schooling," Econometrica, Econometric Society, vol. 68(4), pages 997-1012, July.
    3. Ryan, Mandy & Scott, David A. & Donaldson, Cam, 2004. "Valuing health care using willingness to pay: a comparison of the payment card and dichotomous choice methods," Journal of Health Economics, Elsevier, vol. 23(2), pages 237-258, March.
    4. repec:dgr:kubcen:200427 is not listed on IDEAS
    5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    6. Jay Bhattacharya & Azeem Shaikh & Edward Vytlacil, 2005. "Treatment Effect Bounds: An Application to Swan-Ganz Catheterization," NBER Working Papers 11263, National Bureau of Economic Research, Inc.
    7. Manski, C.F., 1989. "Nonparametric Bounds On Treatment Effects," Working papers 8909, Wisconsin Madison - Social Systems.
    8. Herriges, Joseph A. & Shogren, Jason F., 1996. "Starting Point Bias in Dichotomous Choice Valuation with Follow-Up Questioning," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 112-131, January.
    9. Blumenschein, Karen & Johannesson, Magnus & Yokoyama, Krista K. & Freeman, Patricia R., 2001. "Hypothetical versus real willingness to pay in the health care sector: results from a field experiment," Journal of Health Economics, Elsevier, vol. 20(3), pages 441-457, May.
    10. Philipson, Tomas, 2001. "Data Markets, Missing Data, and Incentive Pay," Econometrica, Econometric Society, vol. 69(4), pages 1099-1111, July.
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