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Measuring Delay Discounting in Humans Using an Adjusting Amount Task
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Demand Analysis under Latent Choice Constraints.

Nikhil Agarwal1, Paulo Somaini2

  • 1Department of Economics, MIT and NBER, USA.

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Consumer choices are often limited by rationing or information gaps. This study analyzes consumer preferences and choice constraints in markets like healthcare, finding that dialysis facilities ration patients based on caseloads, influencing patient travel decisions.

Keywords:
Demand estimationDialysisMatching

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Area of Science:

  • Economics
  • Healthcare Market Analysis
  • Econometrics

Background:

  • Consumer choices are frequently restricted by supply-side rationing or information asymmetries.
  • This impacts various markets, including education, labor, consumer goods, and healthcare services.
  • Existing models often simplify choice-set formation and consumer preferences.

Purpose of the Study:

  • To develop and non-parametrically identify a general random utility model incorporating endogenous characteristics and choice-set formation.
  • To propose an estimator for this model and apply it to the kidney dialysis market.
  • To test for choice-set constraints and estimate consumer preferences and facility rationing rules.

Main Methods:

  • Analysis of a general random utility model with endogenous characteristics and a reduced-form choice-set formation rule.
  • Non-parametric identification strategy requiring two sets of instruments: one for preferences, one for choice sets.
  • Application of the proposed estimator to California's kidney dialysis admissions data using a Gibbs sampler.

Main Results:

  • Both sets of instruments are necessary for model identification.
  • Dialysis facilities are less likely to admit new patients with higher caseloads.
  • Patients travel further for dialysis when local facilities have high caseloads, indicating choice-set constraints.

Conclusions:

  • The study successfully identifies and estimates a model of consumer choice under rationing and information frictions.
  • Evidence suggests significant rationing behavior by dialysis providers and its impact on patient choices.
  • The developed methods provide a framework for analyzing other markets with similar choice constraints.