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APES – Braga, 11 October 2013
Gianandrea Staffiero
(CRES-Universitat Pompeu Fabra-Matrix)
Aurora Garcia Gallego (Un. Jaume I)
Nikos Georgantzis (Un. Jaume I, Un. Granada)
Tarek Jaber López (Un. Jaume I)
Can Co-Payment CurbOver-Consumption?
Experimental Evidence
26/06/2013
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Introduction
• When co-payment makes sense. Especially in healthcare.
• Policy and users’ trade-offs involved in consumption.
• Behavioural effects and experimental analysis of the effect of a small charge.
• Evolution of appropriation of common resources.
• Conclusions.
26/06/2013
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The Rationale of Co-Payment (1)
26/06/2013 … (even Barcelona)
1. Reduction of public expenditures.• Good reason in financial troubles?• Transfer of resources to reduce public
deficit... From whom?• Is a transfer from (e.g.) healthcare users to
the State politically acceptable?• Equity implications? Are users richer? Are
users better-off in general?
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The Rationale of Co-Payment (2)
26/06/2013 … (even Barcelona)
2. Rationalise demand and reduce over-consumption.• “Social optimum”:
marginal benefit = marginal cost• BUT: Users do not bear costs.
Over-consumption• Co-Payment goal: alignment of private
costs to social costs.
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Caveats
• Outside the scope of this paper:
User information may be limited. User and decision-maker may not
coincide (e.g. Patient vs Prescriber). Short-term savings may imply long-
term costs.
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Policy trade-off
• Policy-maker trade-off on co-payments:Equity: imposing a financial burden on the ill.
Efficiency: aligning costs and benefits.
• Very low benefits even small charges avoid over-use.
• Very high user charges risk of under-consumption.
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Users’ trade-off
• Should I use the public good?• Individual incentive: YES.• Social welfare perspective: NO.• If Co-Payment = Marginal Costs, trade-off is
solved.• Political compromise may lead to preserving
users’ trade-off with user charges < costs.
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Behavioural economics effects
• Charges preserving individual/collective welfare trade-off.
• “Pain of paying” (Prelec, Loewenstein): big difference between having it free or paying a small amount co-payment should succeed.
• Motivational Crowding-out (Frey): as you make me pay, I don’t cooperate towards public goals
co-payment is a bad idea.
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Experimental Analysis
• Does a small price, leaving users’ trade-off intact, curb over-consumption?
• “Common-pool resource” game: selfish withdrawal of public resources versus cooperative restraint.
• Controlled environment, perfect information, linearity in payoff determination to ensure that subjects can easily grasp the main aspects of game.
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Experimental Procedures
• 125 students: 35 in Baseline (B), 30 in Co-Payment (C), 60 in Baseline+Co-Payment (BC)-
• University Jaume I (Castelló, Valencia), July 2012.
• No use of wording “Co-Payment” in the instruction.
• 30 rounds in each session, unknown to subjects• Random (re-)matching in groups of 5.• Payment according to payoff in a single round,
randomly selected at the end of the experiment.
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Experimental Design - Baseline
• Baseline: Common fund worth €100. Each subject can withdraw up to €10. Each euro withdrawn reduces the funds by €2.
What remains in the fund is shared equally among the five members of the group.
• If Xi is what player i withdraws, player 1 gets:
X1 + 1/5 (100 - 2X1 - 2X 2 - 2X 3 - 2 X 4- 2 X 5)
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Experimental Design – Co-payment
• Treatment C: to withdraw €1, you have to pay €0.1, that enters the fund.
• Player 1 gets:
X1 - 0.1 X1 + 1/5 [(100 - 2X1 - 2X 2 - 2X 3 - 2 X 4- 2
X 5) + 0.1·(X1 + X 2 + X 3 + X4 + X5 )]
• BC: 15 rounds as in B, then announcement of rules as in C.
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Predictions
• Under standard payoff maximization assumptions, in the subgame perfect Nash equilibrium all members withdraw 10, every round, in all three treatments.
• Pareto inefficiency: they all end up with 10, whereas they would get 20 each cooperating.
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Average extraction, by treatment
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Common fund after extraction
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Results
1. Withdrawals increase during the first 15 rounds.
Usually explained in terms of conditional cooperation.
2. No single round shows significant differences between B and BC.
The introduction of co-payment does not succeed in improving efficiency.
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3. Withdrawals are lower in the C treatment.
If it’s there from the outset, the existence of a price does reduce over-consumption.
4. Withdrawals continue to increase in rounds B and BC, but not in C!
In C, increase is limited to the first few rounds. Then withdrawals levels remain more or less constant.
Results
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Main findings
• People used to appropriate public goods does not refrain to do so after the introduction of a small charge that does not change individual incentives.
• On the other hand, there is no crowding-out: the presence of a price from the beginning does reduce appropriation.
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Discussion
• A small price gives a hint towards refraining from the full appropriation of a common resource.
• Having a resource for free spoils the effectiveness of small charges in curbing over-consumption.
• Further research: Stochastic benefits Inequality and co-payment