Via Logan Sachon at the Billfold, Science Daily writes that “Consumers assume their risk of getting a serious illness is higher when medications are cheaper because they believe that prices for life-saving products are based on need and not profit, according to a new study in the Journal of Consumer Research.”
Really? It’s not just that people are more likely to buy a cheaper product than an expensive one because they’re trying to save money? Here’s the research experiment from Adriana Samper and Janet Schwartz:
In another study, consumers were told they should get a flu shot. Personal health (avoiding illness or lost income from missing work) was emphasized for some of them, while public health (avoiding spreading the flu or burdening the economy by missing work) was emphasized for others. The price of the vaccine varied ($25 or $125), but was always covered by insurance. Consumers believed they were more likely to get the flu when the vaccine was $25 compared to $125, but only when personal health was emphasized. Consumers saw low prices as indicating a higher need for the vaccine, which caused them to feel they were at greater risk. However, when directed to think about how the flu shot benefited society, consumers did not think about price as an indicator of their own risk.
The conclusion that people respond more to self-interested messages about personal health than broad ones about public health seems clear enough. But on the pricing question, let me suggest a different interpretation: People don’t trust insurance companies. People hear “oh insurance covers it” but they still think there will be a higher price to be paid for consuming expensive stuff versus cheap stuff. After all, who trusts insurance companies?
At the American Economic Association conference I learned of a similar issue from Luigi Zingales (PDF) who was interested in the gap between economists’ beliefs and the general public’s beliefs. He found a very large gap on the question of whether a gas tax or a vehicle-mileage standard would be a better way to reduce fuel consumption. Among economists, tax-and-rebate is overwhelmingly more popular. And it is, in fact, the better policy. But the public disagrees. Zingales’ interesting finding is that if you specifically stipulate that the tax revenue will be rebated, support for the tax goes up. But only a little. Among those who don’t change their minds, “51% state that they do not trust the government to rebate them the money.” Now to someone moderately sophisticated about survey design, this is going to be maddening. The question of trust isn’t on the table. The survey stipulates that the money will be rebated. And yet many people simply refuse to accept the premise.
I’d suggest that something similar may be happening on the vaccine survey. Sure you can say the insurance company will cover it, but who among us hasn’t had the occasional bad experience with an insurance company? Maybe it’ll lead to higher premiums? Who knows?