Essays on Markets with Price Regulations

Geddes, Eilidh

doi:https://doi.org/10.21985/n2-d3n1-ds62

Work

Essays on Markets with Price Regulations

Public

Download PDF

This dissertation studies three markets with regulated prices. I focus on how these regulations shape the behavior of firms along non-price dimensions. Chapter 1 studies the effects of community rating regulations in the US individual health insurance exchange market. In this market, the Affordable Care Act established community rating areas made up of groups of counties in which insurers must offer plans at uniform prices, but insurers do not have to enter all counties in a rating area. Allowing partial entry creates trade-offs in rating area design: larger areas may support more competition, but heterogeneous areas may promote partial entry as firms choose to not enter high cost areas. To evaluate these trade-offs, I develop a model of insurer entry and pricing decisions and investigate how insurers respond to rating area design. I find that banning partial entry increases overall entry, average prices, and consumer welfare. I quantify the trade-offs of increasing rating area size and find returns to size concentrated when marginal costs are similar across counties in a rating area. Regulators must balance promoting competition with pooling high and low cost consumers in rating area design. Chapter 2 (which is joint work with Molly Schnell) studies how regulated prices can change the supply-side responses to health insurance expansions in the setting of retail clinics. Retail clinics are on-demand health care clinics located in retail settings. Exploiting county-level changes in insurance coverage following the Affordable Care Act and 1,721 retail clinic entries and exits, we find that local increases in insurance coverage do not lead to growth in the concentration of clinics on average using two-way fixed effects and instrumental variable designs. However, this null effect masks important heterogeneity by insurance type: growth in private insurance leads to large growth in clinic entry, whereas clinic penetration is dampened by increases in Medicaid coverage. Consistent with a model in which firms face demand from both markets with administered and market-based pricing, we find that the positive (negative) supply-side effects of private insurance (Medicaid coverage) are concentrated in states with low provider reimbursements under Medicaid. We further show that similar location patterns are observed among other types of health care clinics, including urgent care centers. While it has long been accepted that reductions in the prices paid by consumers following insurance expansions should lead the supply side to expand to meet increased demand (Arrow 1963), our results demonstrate that whether health insurance expansions cause the supply side to expand or contract further depends on how the prices received by providers are affected. Chapter 3 (which is joint work with Nicole Holz) studies how landlords behave when they remain in the rental market when rent control policies are enacted. Rent control policies seek to ensure affordable and stable housing for current tenants; however, they also increase the incentive for landlords to evict tenants since rents re-set when tenants leave in a vacancy decontrol system. Evictions may reduce both the anti-displacement and rent reduction effects of rent control. We exploit variation across ZIP codes in policy exposure to the 1994 rent control referendum in San Francisco to study the effects of rent control on eviction behavior. We find that for every 1,000 newly rent controlled units in a ZIP code, there were 20 additional eviction notices filed in that ZIP code and an additional 7 wrongful eviction claims. These effects were concentrated in low income ZIP codes and were larger in years when average rent prices rose faster than the allowed rent increases for controlled units.

Creator