Volume 22, Issue 1

Consumers are uncertain about their preferences for innovative product attributes until the first trial. They search for information as a means of reducing uncertainty and improving the likelihood that they will be satisfied with their purchase. One way to receive information is through peer networks. As a peer network is often a priori unknown, we conduct an experiment to solicit self-reported peer nominations. We compare two mechanisms through which peer networks operate: Strength of social ties and perceived peer expertise, to draw inferences regarding consumers’ preference reversal after exposure to peer recommendations. Our results indicate that perceived source expertise influences preferences while the closeness of social relationships has no statistically significant impact.

It is widely believed that Medicaid reimbursement for primary care is too low and that these low fees adversely affect access to healthcare for Medicaid recipients. In this article, we exploit changes in Medicaid physician fees for primary care to study the response of primary care visits and services that are complements/substitutes with primary care, including emergency department, hospitalization, prescription drugs, and imaging. Results from our study indicate that higher Medicaid fees for primary care have modest effects. Among non-blind and non-disabled adults, we find that a 25% (or $10) increase in Medicaid fees for primary care is associated with approximately a 5% of a standard deviation increase in the number of primary care visits. For the same group, we also find that the fee increase is associated with an increase in the probability of having any primary care visits of approximately 3 percentage points. For children, changes in Medicaid fees are not significantly related to the number of primary care visits. In terms of other types of care, we find some evidence that Medicaid fees for primary care are associated with prescription drug use, and no evidence that primary care fees are associated with the use of emergency department, inpatient services, or imaging. Overall, our evidence provides, at best, limited support for the large effects of Medicaid fees on service provision sometimes asserted in policy discussions.