{"id":{"repo_id":"mit","oai_identifier":"oai:dspace.mit.edu:1721.1/104617"},"canonical_url":"https://search.dev.ndltd.org/etd/mit/oai:dspace.mit.edu:1721.1/104617","repository":{"repo_id":"mit","name":"MIT","base_url":"https://dspace.mit.edu/oai/request"},"display":{"title":"Supply response to consumer inertia : strategic pricing in Medicare Part D","abstract":"A growing literature has documented evidence that consumers in health insurance markets are inertial, or behave as though they face substantial switching costs in choosing a health insurance plan. I investigate whether the private firms that provide prescription drug insurance through Medicare Part D exploit this inertia when setting prices. I first document descriptive evidence consistent with insurers initially setting low prices in order to \"invest\" in future demand before later raising prices to \"harvest\" inertial consumers. I then apply a two-step estimation approach following Bajari, Benkard and Levin (2007) to explore the implications of these invest and harvest incentives for equilibrium pricing, finding that on net, demand inertia reduces equilibrium prices (i.e. the invest incentive dominates the harvest incentive). Finally, I evaluate welfare consequences of policies that could be used to constrain insurers' ability to conduct such \"invest-then-harvest\" pricing patterns. I find, for example, that a policy change to cap premium increases would improve consumer welfare by both lowering average premiums and smoothing prices over time.","abstract_html":"A growing literature has documented evidence that consumers in health insurance markets are inertial, or behave as though they face substantial switching costs in choosing a health insurance plan. I investigate whether the private firms that provide prescription drug insurance through Medicare Part D exploit this inertia when setting prices. I first document descriptive evidence consistent with insurers initially setting low prices in order to "invest" in future demand before later raising prices to "harvest" inertial consumers. I then apply a two-step estimation approach following Bajari, Benkard and Levin (2007) to explore the implications of these invest and harvest incentives for equilibrium pricing, finding that on net, demand inertia reduces equilibrium prices (i.e. the invest incentive dominates the harvest incentive). Finally, I evaluate welfare consequences of policies that could be used to constrain insurers' ability to conduct such "invest-then-harvest" pricing patterns. I find, for example, that a policy change to cap premium increases would improve consumer welfare by both lowering average premiums and smoothing prices over time.","abstract_has_math":false,"creators":["Wu, Yufei, Ph. D. Massachusetts Institute of Technology"],"institution":"Massachusetts Institute of Technology","degree_name":null,"degree_level":null,"degree_discipline":null,"degree_department":"Massachusetts Institute of Technology. Department of Economics.","school":null,"contributors":[],"advisors":["Amy Finkelstein."],"committee_chairs":[],"committee_members":[],"year":2016,"date_issued":"2016","date_published":"2016","updated_at":"2026-07-22T22:21:04Z","subjects":["Economics."],"languages":["eng"],"rights":["M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. 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I investigate whether the private firms that provide prescription drug insurance through Medicare Part D exploit this inertia when setting prices. I first document descriptive evidence consistent with insurers initially setting low prices in order to \"invest\" in future demand before later raising prices to \"harvest\" inertial consumers. I then apply a two-step estimation approach following Bajari, Benkard and Levin (2007) to explore the implications of these invest and harvest incentives for equilibrium pricing, finding that on net, demand inertia reduces equilibrium prices (i.e. the invest incentive dominates the harvest incentive). Finally, I evaluate welfare consequences of policies that could be used to constrain insurers' ability to conduct such \"invest-then-harvest\" pricing patterns. I find, for example, that a policy change to cap premium increases would improve consumer welfare by both lowering average premiums and smoothing prices over time."]},{"key":"dc:description.degree","label":"Dc Description Degree","values":["S.M."]},{"key":"dc:title","label":"Title","values":["Supply response to consumer inertia : strategic pricing in Medicare Part D"]}]}],"canonical_facts":{"dc:contributor.advisor":["Amy Finkelstein."],"dc:contributor.department":["Massachusetts Institute of Technology. Department of Economics."],"dc:contributor.other":["Massachusetts Institute of Technology. Department of Economics."],"dc:creator":["Wu, Yufei, Ph. D. 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I then apply a two-step estimation approach following Bajari, Benkard and Levin (2007) to explore the implications of these invest and harvest incentives for equilibrium pricing, finding that on net, demand inertia reduces equilibrium prices (i.e. the invest incentive dominates the harvest incentive). Finally, I evaluate welfare consequences of policies that could be used to constrain insurers' ability to conduct such \"invest-then-harvest\" pricing patterns. I find, for example, that a policy change to cap premium increases would improve consumer welfare by both lowering average premiums and smoothing prices over time."],"dc:description.degree":["S.M."],"dc:identifier.uri":["http://hdl.handle.net/1721.1/104617"],"dc:language.iso":["eng"],"dc:publisher":["Massachusetts Institute of Technology"],"dc:rights":["M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission."],"dc:rights.uri":["http://dspace.mit.edu/handle/1721.1/7582"],"dc:subject":["Economics."],"dc:title":["Supply response to consumer inertia : strategic pricing in Medicare Part D"],"dc:type":["Thesis"]},"updated_at":"2026-07-22T22:21:04Z"}