Economic Research Seminar
"Cost-Sharing or Rebate: What Drives Patients’ Treatment Decisions?“
This paper investigates how individuals’ treatment decisions vary with framing incentives as either cost-sharing or rebates. We derive three behavioral hypotheses on how the change in frame affects behavior. In a laboratory experiment, we find that rebates are more effective in containing cost as individuals request significantly less inefficient low-value care under rebates than under cost-sharing. We link individual decisions to a direct measure of loss-aversion but find no evidence that loss-aversion influences utilization rates. Our results suggest that relative thinking and the difficulty of understanding the dynamic incentive structure drive the framing effect.