Robert Nuscheler

Quality and location choices under price regulation

In a model of spatial competition, we analyze the equilibrium outcomes in markets where the product price is exogenous. Using an extended version of the Hotelling model, we assume that firms choose their locations and the quality of the product they supply. We derive the optimal price set by a welfarist regulator. If the regulator can commit to a price prior to the choice of locations, the optimal (second-best) price causes overinvestment in quality and an insufficient degree of horizontal differentiation (compared with the first-best solution) if the transportation cost of consumers is sufficiently high. Under partial commitment, where the regulator is not able to commit prior to location choices, the optimal price induces first-best quality, but horizontal differentiation is inefficiently high.

The political economy of the German Länder deficits: weak governments meet strong finance ministers

We analyse the deficits of the German Länder (regional states) for the period 1960 to 2005 and test a number of hypotheses derived from the literature on the political economy of public deficits. We find evidence for the weak government hypothesis, that is, coalition governments issue significantly more debt than single party governments – a result that is typically explained by the common pool problem. As our data suggest, this result crucially hinges on the position or strength of the finance minister within coalition governments. We find that coalition governments with a strong finance minister are – in terms of borrowing – not significantly different from single party governments. In addition, we find (weak) evidence for an opportunistic political business cycle. As borrowing is significantly lower in pre-election years it appears that German voters favour fiscal discipline. There is no evidence for partisan behaviour, so party ideology seems to play a negligible role.

Physician reimbursement, time-consistency and the quality of care

We use a model of horizontal and vertical differentiation to study physicians’ incentives to provide quality in the physician-patient relationship under price regulation. If the price is the only regulatory variable, the social planner cannot implement the first-best policy. Moreover, the second-best policy is time inconsistent. Excess entry and firstbest efficient total quality provision is observed in the game without commitment. Allowing physicians to compete in prices does not solve the commitment problem since the competitive solution coincides with the time consistent outcome. In the median voter equilibrium the time consistency problem is more severe.

PUBLIC AND PRIVATE HEALTH INSURANCE IN GERMANY: THE IGNORED RISK SELECTION PROBLEM

We investigate risk selection between public and private health insurance in Germany. With risk-rated premiums in the private system and community-rated premiums in the public system, advantageous selection in favor of private insurers is expected. Using 2000 to 2007 data from the German Socio-Economic Panel Study (SOEP), we find such selection. While private insurers are unable to select the healthy upon enrollment, they profit from an increase in the probability to switch from private to public health insurance of those individuals who have experienced a negative health shock. To avoid distorted competition between the two branches of health care financing, risk-adjusted transfers from private to public insurers should be instituted.

Optimal public provision of nursing homes and the role of information.

Increasing demand for long-term care poses at least five challenges to the policy-maker: (i) How should care be supplied, within a nursing home or within the family? (ii) What level of care should be provided in the different arrangements? (iii) How do the answers relate to the severity of dependence? (iv) How can financial strain be mitigated for families with severely dependent members? (v) What is the role of information constraints for the nature and scope of optimal long-term care policy? We consider a theoretical model of long-term care provision under adverse selection to address these challenges. Our main - and remarkably robust - result is that nursing home care facilitates self selection and mitigates and possibly eliminates distortions in caring levels and transfers. Informational asymmetries may thus lead to care being provided too often within institutions rather than within a family context.

Monopoly pricing with negative network effects: The case of vaccines

We study the market for vaccinations considering income heterogeneity on the demand side and monopoly power on the supply side. A monopolist has an incentive to exploit the external effect of vaccinations and leave the poor susceptible in order to increase the willingness to pay of the rich. Even the possibility to perfectly price discriminate does not remove this incentive. Pigouvian subsidies may even make things worse. Mandatory vaccination programs covering only the poor succeed in eradicating the disease. This offers an efficiency based rationale for distribution-oriented national or international public health interventions.

Willingness-to-Pay for Parallel Private Health Insurance: Evidence from a Laboratory Experiment

Debate over the effects of public versus private health care finance persists in both academic and policy circles. This paper presents the results of a revealed preference laboratory experiment that tests how characteristics of the public health system affect a subjects willingness-to-pay (WTP) for parallel private health insurance. Consistent with the theoretical predictions of Cuff et al. (2010), subjects’ average WTP is lower and the size of the private insurance sector smaller when the public system allocates health care based on need rather than randomly and when the probability of receiving health care from the public system is high. (Les debats continuent quant aux effets compares du financement prive et public des soins de santea la fois dans le monde academique et le monde des definisseurs de politiques. Ce memoire presente les resultats d’une experience de laboratoire destinee a reveler les preferences et a montrer comment des caracteristiques du systeme public de soins de sante affectent la volonte de payer pour des services paralleles d’assurance sante privee. En ligne avec les predictions theoriques de Cuff et al. (2010), la volonte moyenne de payer est plus faible et la taille du secteur de l’assurance privee plus petite quand le regime public est fonde sur les besoins plutot qu’aleatoire, et quand la probabilite de recevoir les soins du regime public est elevee.)

Willingness-To-Pay for Parallel Private Health Insurance: Evidence from a Laboratory Experiment (Volonté De Payer Pour Des Services Parallèles D’Assurance Santé: Résultats D’Une Expérience De Laboratoire)

Debate over the effects of public versus private health care finance persists in both academic and policy circles. This paper presents the results of a revealed preference laboratory experiment that tests how characteristics of the public health system affect a subjects willingness-to-pay (WTP) for parallel private health insurance. Consistent with the theoretical predictions of Cuff et al. (2010), subjects’ average WTP is lower and the size of the private insurance sector smaller when the public system allocates health care based on need rather than randomly and when the probability of receiving health care from the public system is high. (Les debats continuent quant aux effets compares du financement prive et public des soins de santea la fois dans le monde academique et le monde des definisseurs de politiques. Ce memoire presente les resultats d’une experience de laboratoire destinee a reveler les preferences et a montrer comment des caracteristiques du systeme public de soins de sante affectent la volonte de payer pour des services paralleles d’assurance sante privee. En ligne avec les predictions theoriques de Cuff et al. (2010), la volonte moyenne de payer est plus faible et la taille du secteur de l’assurance privee plus petite quand le regime public est fonde sur les besoins plutot qu’aleatoire, et quand la probabilite de recevoir les soins du regime public est elevee.)

Risk-taking in vaccination, surgery, and gambling environments: Evidence from a framed laboratory experiment

Vaccination involves a tradeoff between two risky alternatives, namely, susceptibility and immunization. By designing a controlled laboratory experiment, we investigate the association between risk preferences and immunization decisions. To contrast the role of risk preferences in vaccination decisions with other domains, we implemented four frames: vaccination, surgery, complex neutral, and simple neutral. We found direct framing effects for females but not for males. For the former, the demand for the safer alternative is significantly larger in the surgery frame than in all other frames. For male subjects, we found a significant association between stated risk preferences and choice behavior in the simple neutral frame but not in the other three frames. For female subjects, we observed the exact opposite. Although the complexity of the decision problem matters, there is no indication of differential roles of risk preferences for a given complexity. We found that the share of consistent choices is significantly larger in the surgery frame as compared to the two neutral frames, that is, context improves decision making. This does not apply to the vaccination frame, so there is something about vaccinations that prevents individuals from better understanding the decision problem at hand.

Financing and Funding Health Care: Optimal Policy and Political Implementability

Health care financing and funding are usually analyzed in isolation. This paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them. We investigate the impact of three modes of health care financing, namely, optimal income taxation, proportional income taxation, and insurance premiums, on optimal provider payment and on the political implementability of optimal policies under majority voting. Considering a standard multi-task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns. We show that health care financing also has a bearing on the political implementability of optimal health care policies. Our results demonstrate that an isolated analysis of (optimal) provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority.