NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Nicolai V. Kuminoff

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October 2016Estimating the Heterogeneous Welfare Effects of Choice Architecture: An Application to the Medicare Prescription Drug Insurance Market
with Jonathan D. Ketcham, Christopher A. Powers: w22732
We develop a structural model for bounding welfare effects of policies that alter the design of differentiated product markets when some consumers may be misinformed about product characteristics and inertia in consumer behavior reflects a mixture of latent preferences, information costs, switching costs and psychological biases. We use the model to analyze three proposals to redesign markets for Medicare prescription drug insurance: (1) reducing the number of plans, (2) providing personalized information, and (3) defaulting consumers to cheap plans. First we combine administrative and survey data to determine which consumers make informed enrollment decisions. Then we analyze the welfare effects of each proposal, using revealed preferences of informed consumers to proxy for concealed pref...
July 2015Which Models Can We Trust to Evaluate Consumer Decision Making? Comment on “Choice Inconsistencies among the Elderly”
with Jonathan D. Ketcham, Christopher A. Powers: w21387
Neoclassical and psychological models of consumer behavior often make divergent predictions for the welfare effects of paternalistic policies, leaving wide scope for researchers’ choice of a model to influence their policy conclusions. We develop a framework to reduce this model uncertainty and apply it to administrative data on consumer decision making in Medicare Part D. Consumers’ choices for prescription drug insurance plans can be explained by Abaluck and Gruber’s (AER 2011) model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases. We evaluate these competing hypotheses using nonparametric tests of utility maximization and a trio of model validation tests. We find that 79% of enrollment decisions in Medicare Part D ...
September 2010The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation
with V. Kerry Smith, Christopher Timmins: w16349
Households "sort" across neighborhoods according to their wealth and their preferences for public goods, social characteristics, and commuting opportunities. The aggregation of these individual choices in markets and in other institutions influences the supply of amenities and local public goods. Pollution, congestion, and the quality of public education are examples. Over the past decade, advances in economic models of this sorting process have led to new framework that promises to alter the ways we conceptualize the policy evaluation process in the future. These "equilibrium sorting" models use the properties of market equilibria, together with information on household behavior, to infer structural parameters that characterize preference heterogeneity. The results can be used to dev...

Published: "The New Economics of Equilibrium Sorting and Policy Evaluation Using Housing Markets," with Nicolai Kuminoff and Kerry Smith. Journal of Economic Literature. Vol.51, No.4 (2013):1007-1062.

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