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Search and Prices in the Medigap Insurance Market

Author

Listed:
  • Haizhen Lin

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Matthijs R. Wildenbeest

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

This paper studies search and prices in the Medigap insurance market. Using data on market shares, insurer characteristics, and plan prices, we estimate to what extent prices can be explained by search and product differentiation. In our model, consumers search across Medigap insurers for prices as well as plan types. Our estimates indicate search costs are substantial: the estimated median cost of searching for an insurer is $22. Using the estimated parameters we nd that eliminating search costs could result in price decreases of as much as 5 percent, along with increases in average consumer welfare of up to $321.

Suggested Citation

  • Haizhen Lin & Matthijs R. Wildenbeest, 2013. "Search and Prices in the Medigap Insurance Market," Working Papers 2013-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2013-15
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    References listed on IDEAS

    as
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    Cited by:

    1. Maarten Janssen & Sandro Shelegia, 2015. "Consumer Search and Double Marginalization," American Economic Review, American Economic Association, vol. 105(6), pages 1683-1710, June.
    2. Bart J. Bronnenberg & Jun B. Kim & Carl F. Mela, 2016. "Zooming In on Choice: How Do Consumers Search for Cameras Online?," Marketing Science, INFORMS, vol. 35(5), pages 693-712, September.
    3. Braun, Alexander & Ben Ammar, Semir & Eling, Martin, 2019. "Asset pricing and extreme event risk: Common factors in ILS fund returns," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 59-78.

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    More about this item

    Keywords

    Medigap; health insurance; search; product differentiation; price dispersion;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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