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In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of

  • Hendrik Schmitz

    ()

  • Nicolas R. Ziebarth

Health Plan Choice Abstract: This paper provides field evidence on (a) how price framing affects consumers’ decision to switch health insurance plans and (b) how the price elasticity of demand for health insurance can be influenced by policymakers through simple regulatory efforts. In 2009, in order to foster competition among health insurance companies, German federal regulation required health insurance companies to express price differences between health plans in absolute Euro values rather than percentage point payroll tax differences. Using individual-level panel data, as well as aggregated health plan-level panel data, we find that the reform led to a sixfold increase in an individual’s switching probability and a threefold demand elasticity increase.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0304.

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Length: 51 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:rwi:repape:0304
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