Three essays in economics

James R Bland, Purdue University


How Many Games Are We Playing: An Experimental Analysis of Choice Bracketing in Games A subject brackets two decisions if she "choose[s] an option in each case without full regard to the other" Rabin (2009). Although in most situations such behavior is unlikely to be optimal, it is well documented in experiments where subjects make decisions in the absence of strategic considerations. This paper uses an economic experiment to investigate whether subjects also bracket their decisions in games. Subjects played two Volunteer's Dilemmas at the same time, with the payoffs from both games added to their earnings. In a lottery task, subjects were generally revealed to be risk-averse narrow bracketers. Aggregate play in the Roommate's Dilemma is not consistent with predictions made by assuming all subjects either narrowly or broadly bracket. On the individual level, structural modeling suggests that most subjects bracket narrowly in the game. Mixture Models of Behavior and Nuisance Parameters: A Semi-Parametric Bayesian Approach When there is more than one model of decision-making that could explain behavior in experiments, the mixture model is a useful tool in taking theory to data. The estimation results can inform the researcher about the prevalence of each model in the sample, and whether observable characteristics of subjects are predictors of which model they use. Each model typically specifies a function describing behavior, but also requires individual-level "nuisance parameters'' that must also be estimated. We demonstrate that restrictive econometric assumptions made on these individual parameters can result in the researcher overstating the importance of type heterogeneity (subjects using different decision rules), when in fact the cause of heterogeneous choices is subject parameter heterogeneity (subjects having different nuisance parameters). We propose a less restrictive assumption, and demonstrate its implementation on some existing experimental data. Hospital-Insurer Bargaining Power and Negotiated Rates. In addition to risk-sharing, U.S. health insurance companies negotiate rates for services with hosptials. The price of service can vary depending on which entity, if any, is insuring the patient. Insurers (and possibly their customers) benefit from negotiating through lower prices, while hospitals benefit through higher patient volume. Using Massachusetts' Center for Health Information and Analysis (CHIA) data, we use hospital and insurer characteristics to estimate negotiated prices specific to hospital-insurer pairs. We investigate the relationship between two important quantities: (i) the charged amount that hospitals bill for their services, and (ii) the amount that hospitals are paid for insured patients. These numbers differ because the former is a function only of the services provided and the hospital's "chargemaster'' prices, while the latter is the result of negotiation. We find that payments for privately insured patients are on average 38% of charges when payments are made on a fee-for-service basis. However this ratio varies greatly by hospital and insurer. Compared to community hospitals without an emergency room, academic medical centers are compensated 15% more for their services, and hospitals with an emergency room are compensated 7% more than those without.




Cason, Purdue University.

Subject Area

Economics|Economic theory

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