Social learning and health plan choice

I use data from the University of California to empirically examine the role of social learning in employees' choices of health plans. The basic empirical strategy starts with the observation that if social learning is important, health plan selections should appear to be correlated across employees within the same department. Estimates of discrete choice models in which individuals' perceived payoffs are influenced by coworkers' decisions reveal a significant (but not dominant) social effect. The strength of the effect depends on factors such as the department's size or the employee's demographic distance from her coworkers. The estimated effects are present even when the model allows for unobserved, department-specific heterogeneity in employee preferences, so the results cannot be explained away by unobservable characteristics that are common to employees of the same department.