NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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How do Humans Interact with Algorithms? Experimental Evidence from Health Insurance

Kate Bundorf, Maria Polyakova, Ming Tai-Seale

NBER Working Paper No. 25976
Issued in June 2019
NBER Program(s):Program on the Economics of Aging, Health Care Program, Health Economics Program, Industrial Organization Program, Labor Studies Program, Public Economics Program

Algorithms increasingly assist consumers in making their purchase decisions across a variety of markets; yet little is known about how humans interact with algorithmic advice. We examine how algorithmic, personalized information affects consumer choice among complex financial products using data from a randomized, controlled trial of decision support software for choosing health insurance plans. The intervention significantly increased plan switching, cost savings, time spent choosing a plan, and choice process satisfaction, particularly when individuals were exposed to an algorithmic expert recommendation. We document systematic selection - individuals who would have responded to treatment the most were the least likely to participate. A model of consumer decision-making suggests that our intervention affected consumers’ signals about both product features (learning) and utility weights (interpretation).

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Document Object Identifier (DOI): 10.3386/w25976

 
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