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Asymmetric Demand Response When Prices Increase and Decrease: The Case of Child Health Care
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DOI：10.1162/rest_a_01110.png)
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This study tests whether demand responds symmetrically to price increases and decreases-a seemingly obvious proposition under conventional demand theory that has not been rigorously tested. Exploiting the rapid expansion in Japanese municipal subsidies for child health care in a difference-in-differences framework, we find evidence against conventional demand theory: when coinsurance, our price measure, increases from 0% to 30%, the demand response is more than twice that to a price decrease from 30% to 0%. This result indicates that while economists and policymakers pay little attention, price change direction matters and should be incorporated into welfare analysis.
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LOSS AVERSION
CHOICE
AGENCY
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