Empirical and experimental approaches to nonoptimal allocations of goods and services

This dissertation studies the nonoptimal outcomes of human behavior related to health care. Health is a major component of human capital, which imposes a significant impact on individuals and the society. This dissertation aims to apply modern economic theories and models to reveal causes of nonoptimal outcomes in health care using various empirical and experimental methods. The first chapter studies why smokers tend to keep smoking even though they face a serious deterioration in health. This study employs an extension of the dynamic structural model of rational addiction. However, parametric restrictions on the Markov transition process of smoking capital are removed. This new model finds that smokers' disutility from cessation continues to increase for three to four years, thereby making quitting costly. It further proves that the dilemma between the immediate disutility from quitting and the future disutility from deterioration of health clearly exists and influences smokers' decisions. The second chapter studies the mechanisms behind disparities in the quality of medical care by racial groups and types of insurance. An endogeneity exists between the outcomes and demographic characteristics of patients in any given hospital. This issue is addressed using an instrumental variable that is constructed by simulating a patient's hospital choice. Our results prove that minority patients are systematically sorted into low quality institutions while Medicaid and charity care patients may contribute to poor outcomes. These findings suggest that hospitals serving a large number of minority patients should be given incentives to improve their quality. On the other hand, hospitals with a large number of Medicaid and charity care patients should be provided with extra funding. The third chapter studies dynamic voluntary contribution games. Due to free-rider problems, it is difficult for agents to fund public projects. Theoretical models suggest that completion bonuses and gradual contributions are effective mechanisms in preventing subjects from pursuing a non-contributing equilibrium. This chapter uses an experimental approach to investigate what facilitates the completion of public projects. It is found that subjects are able to overcome the free-rider problem when communication is allowed.Ph.D.Includes bibliographical referencesby Daisuke Got