This paper integrates a randomized controlled trial and structural analysis to investigate how misconceptions about drug efficacy distort consumer decisions in the over-the-counter market and how clearer information can improve consumer welfare. A key challenge is that beliefs about efficacy are unobservable, which complicates the assessment of consumers' initial perceptions and responses to new information. To address this, I gathered pairwise product comparisons from a control group and three treatment arms to develop product-level measures of efficacy beliefs. The most effective treatment --- emphasizing equivalent efficacy ---increases substitution elasticities by 22\% on average, saves the average consumer \$1.09, and generates a welfare gain of \$1.20 per consumer. It results in \$6.5 million annual savings across the 50 largest markets. However, this approach also leads to second-degree price discrimination based on consumers’ preferences for symptom labels, highlighting the need for social planner to make informed policy decisions.
This paper discuss theoretically and empirically second degree price discrimination under the condition when companies use pricing strategies to prevent consumers form learning about equivalence in quality.
This study examines whether Medicare reimbursement schemes play a critical role in addressing market failures, particularly the slow adoption of innovative and consumer-beneficial technologies. Additionally, it proposes policy interventions to …
No one can remain neutral regarding health information about their conditions. While some focus on the worst-case scenario, others seek justifications for not visiting the doctor. The complexity and diversity of current online health information …