Research

Working papers:

"The Fault In Our Stars! Quality Reporting, Bonus Payments and Welfare in Medicare Advantage" (Job Market Paper) - [draft], Online appendix

When consumers are imperfectly informed about the quality of a product, market forces do not incentivize firms to provide the socially optimal level of quality. Imperfect information is a recognized and frequent market failure in the context of public health and has led to initiatives aimed at increasing consumers' access to information and at incentivizing firms to provide higher quality services. This paper analyzes the welfare effects of quality disclosure and quality subsidies on the Medicare Advantage market. On the demand side, consumers receive information on the quality of health insurance plans through a Star Rating System (SRS). On the supply side, higher-rated insurers receive a quality-linked subsidy through a Quality Bonus Program (QBP). I build and estimate an equilibrium model of supply and demand that allows for different consumer types: those who are unaware of the SRS and those who do not and care about the SRS. To separately identify the two types, I survey Medicare-eligible individuals and I find that 80% of the population is unaware of the SRS. In the survey, I conduct a conjoint analysis to elicit preferences for star ratings. I find that respondents who reported they were aware of the SRS place a monthly value of $25 on an extra star rating; slightly more than the ones who reported they were unaware. I combine the survey stated preference with revealed preference choice data and estimate a Bayesian learning discrete choice model. On the supply side, insurers endogenously choose price and quality. My analysis shows that although both the SRS and the QBP can lead to higher quality, welfare improvement is very small compared to the incurred costs. In particular, 75% of the expenditures spent on the QBP is not rationalized by any welfare improvement.

"When to behave badly and when to behave well under disagreement," with David Miller [draft]

In a repeated principal-agent problem in which the agent has private information about her i.i.d. cost of effort (`a la Levin 2003), we analyze relational contracts that the parties can renegotiate in a way that respects their relative bargaining power. We show that if a disagreement arises in a state in which she was to be rewarded, then it is optimal for the agent to destroy surpplus, exerting costly effort to hurt the principal. In such an event, her counter-productive effort is optimally constant regardless of her cost effort, the principal does not fire her, and both parties anticipate agreeing to reward the agent in the next period. In contrast, on the equilibrium path as well as under disagreement in a state in which the agent was to be punished, the agent exerts productive effort that is decreasing in her effort cost.

Work in progress:

"Productivity in multi-input/ multi-product firms: evidence from the Texas hospital industry," with Austin Bean