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Robin Hanson's avatar

David, I meant that when consumer behavior is systematically odd, that suggests you don't understand what exactly the consumers are demanding, which suggests that you are not well positioned to know whether any particular product package is a good deal for them or not.

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Overcoming Bias Commenter's avatar

Barkley and Curt, there is no doubt that travel costs are real, and that at least in some instances travling is out of the question. Presumably even narrow plans would not require travel in those instances. But that does not change the fact that there is a great deal of heterogeneity in prices across providers (particularly hospitals) that are separated by distances no greater than those covered by many people in *daily* commutes. It seems very reasonable to me to suppose that if there were no insurance and people could get a surgical admission for $3000 less at a hospital an hour away, a great many would do so. By the same token, many people (assuming they rationally anticipate future illness) would be willing to buy an insurance product that requires such travel and is correspondingly cheaper if they were free of the indignation that I describe.

Robin,You are right that the "bias" here is not a biased estimate of a parameter, but it is an irrational mental attribute that, conditional on you having it, makes you unable to make a contractual arrangement that otherwise would be in your interest. I suppose that strictly speaking that doesn't count as bias, but it seems like it's in the same neighborhood.

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