Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say that those with more generous plans pay less for a doctor's visit, while those with less generous plans pay more for a visit. You graph t relationship between the price individual pays for doctor visits against the number of visits, and you see a downwa sloping line; let's call this "measured demand." The problem of "endogeneity" discussed this week could arise here if individuals who know they go to the doctor frequently buy more generous coverage while those who know they rarely go to the doctor purchase less genero coverage. This would imply that the "true" demand curve (if we were to account for endogeneity) is the same as. less inelastic than the measured demand curve. more inelastic than the measured demand curve. 00
Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say that those with more generous plans pay less for a doctor's visit, while those with less generous plans pay more for a visit. You graph t relationship between the price individual pays for doctor visits against the number of visits, and you see a downwa sloping line; let's call this "measured demand." The problem of "endogeneity" discussed this week could arise here if individuals who know they go to the doctor frequently buy more generous coverage while those who know they rarely go to the doctor purchase less genero coverage. This would imply that the "true" demand curve (if we were to account for endogeneity) is the same as. less inelastic than the measured demand curve. more inelastic than the measured demand curve. 00
Chapter18: Asymmetric Information
Section: Chapter Questions
Problem 18.9P
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