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Einav, Liran

Overview
Works: 52 works in 144 publications in 1 language and 735 library holdings
Roles: Thesis advisor
Classifications: HB1, 330
Publication Timeline
Key
Publications about Liran Einav
Publications by Liran Einav
Most widely held works by Liran Einav
Estimating risk preferences from deductible choice by Alma Cohen( Book )
12 editions published between 2005 and 2007 in English and held by 69 libraries worldwide
"We use a large data set of deductible choices in auto insurance contracts to estimate the distribution of risk preferences in our sample. To do so, we develop a structural econometric model, which accounts for adverse selection by allowing for unobserved heterogeneity in both risk (probability of an accident) and risk aversion. Ex-post claim information separately identifies the marginal distribution of risk, while the joint distribution of risk and risk aversion is identified by the deductible choice. We find that individuals in our sample have on average an estimated absolute risk aversion which is higher than other estimates found in the literature. Using annual income as a measure of wealth, we find an average two-digit coefficient of relative risk aversion. We also find that women tend to be more risk averse than men, that proxies for income and wealth are positively related to absolute risk aversion, that unobserved heterogeneity in risk preferences is higher relative to that of risk, and that unobserved risk is positively correlated with unobserved risk aversion. Finally, we use our results for counterfactual exercises that assess the profitability of insurance contracts under various assumptions"--National Bureau of Economic Research web site
Production targets by Guillermo Caruana( file )
8 editions published between 2005 and 2006 in English and held by 57 libraries worldwide
We present a dynamic quantity setting game, where players may continuously adjust their quantity targets, but incur convex adjustment costs when they do so. These costs allow players to use quantity targets as a partial commitment device. We show that the equilibrium path of such a game is hump-shaped and that the final equilibrium outcome is more competitive than its static analog. We then test the theory using monthly production targets of the Big Three U.S. auto manufacturers during 1965-1995 and show that the hump-shaped dynamic pattern is present in the data. Initially, production targets steadily increase until they peak about 2-3 months before production. Then, they gradually decline to eventual production levels. This qualitative pattern is fairly robust across a range of similar exercises. We conclude that strategic considerations play a role in the planning phase in the auto industry, and that static models may therefore under-estimate the industry's competitiveness
The welfare cost of asymmetric information : evidence from the U.K. annuity market by Liran Einav( Book )
5 editions published in 2007 in English and held by 50 libraries worldwide
Much of the extensive empirical literature on insurance markets has focused on whether adverse selection can be detected. Once detected, however, there has been little attempt to quantify its importance. We start by showing theoretically that the efficiency cost of adverse selection cannot be inferred from reduced form evidence of how "adversely selected" an insurance market appears to be. Instead, an explicit model of insurance contract choice is required. We develop and estimate such a model in the context of the U.K. annuity market. The model allows for private information about risk type (mortality) as well as heterogeneity in preferences over different contract options. We focus on the choice of length of guarantee among individuals who are required to buy annuities. The results suggest that asymmetric information along the guarantee margin reduces welfare relative to a first-best, symmetric information benchmark by about Đ127 million per year, or about 2 percent of annual premiums. We also find that government mandates, the canonical solution to adverse selection problems, do not necessarily improve on the asymmetric information equilibrium. Depending on the contract mandated, mandates could reduce welfare by as much as Đ107 million annually, or increase it by as much as Đ127 million. Since determining which mandates would be welfare improving is empirically difficult, our findings suggest that achieving welfare gains through mandatory social insurance may be harder in practice than simple theory may suggest
Liquidity constraints and imperfect information in subprime lending by William Adams( file )
5 editions published in 2007 in English and held by 50 libraries worldwide
We present new evidence on consumer liquidity constraints and the credit market conditions that might give rise to them. Our analysis is based on unique data from a large auto sales company that serves the subprime market. We first document the role of short-term liquidity in driving purchasing behavior, including sharp increases in demand during tax rebate season and a high sensitivity to minimum down payment requirements. We then explore the informational problems facing subprime lenders. We find that default rates rise significantly with loan size, providing a rationale for lenders to impose loan caps because of moral hazard. We also find that borrowers at the highest risk of default demand the largest loans, but the degree of adverse selection is mitigated substantially by effective risk-based pricing
Empirical industrial organization a progress report by Liran Einav( Computer File )
6 editions published in 2010 in English and held by 44 libraries worldwide
The field of Industrial Organization has made dramatic advances over the last few decades in developing empirical methods for analyzing imperfect competition and the organization of markets. We describe the motivation for these developments and some of the successes. We also discuss the relative emphasis that applied work in the field has placed on economic theory relative to statistical research design, and the possibility that a focus on methodological innovation has crowded out applications. We offer some suggestions about how the field may progress in coming years
Selection in insurance markets theory and empirics in pictures by Liran Einav( file )
5 editions published in 2011 in English and held by 42 libraries worldwide
We present a graphical framework for analyzing both theoretical and empirical work on selection in insurance markets. We begin by using this framework to review the "textbook" adverse selection environment and its implications for insurance allocation, social welfare, and public policy. We then discuss several important extensions to this classical treatment that are necessitated by important real world features of insurance markets and which can be easily incorporated in the basic framework. Finally, we use the same graphical approach to discuss the intuition behind recently developed empirical methods for testing for the existence of selection and examining its welfare consequences. We conclude by discussing some important issues that are not well-handled by this framework and which, perhaps not unrelatedly, have been little addressed by the existing empirical work
Beyond testing empirical models of insurance markets by Liran Einav( file )
5 editions published in 2009 in English and held by 42 libraries worldwide
We describe recent advances in the empirical analysis of insurance markets. This new research proposes ways to estimate individual demand for insurance and the relationship between prices and insurer costs in the presence of adverse and advantageous selection. We discuss how these models permit the measurement of welfare distortions arising from asymmetric information and the welfare consequences of potential government policy responses. We also discuss some challenges in modeling imperfect competition between insurers, and outline a series of open research questions
Selection on moral hazard in health insurance by Liran Einav( file )
4 editions published in 2011 in English and held by 40 libraries worldwide
In this paper we explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral response to the insurance contract. Such "selection on moral hazard" can have important implications for attempts to combat either selection or moral hazard. We explore these issues using individual-level panel data from a single firm, which contain information about health insurance options, choices, and subsequent claims. To identify the behavioral response to health insurance coverage and the heterogeneity in it, we take advantage of a change in the health insurance options offered to some, but not all of the firm's employees. We begin with descriptive evidence that is suggestive of both heterogeneous moral hazard as well as selection on it, with individuals who select more coverage also appearing to exhibit greater behavioral response to that coverage. To formalize this analysis and explore its implications, we develop and estimate a model of plan choice and medical utilization. The results from the modeling exercise echo the descriptive evidence, and allow for further explorations of the interaction between selection and moral hazard. For example, one implication of our estimates is that abstracting from selection on moral hazard could lead one to substantially over-estimate the spending reduction associated with introducing a high deductible health insurance option
Estimating welfare in insurance markets using variation in prices by Liran Einav( Computer File )
7 editions published in 2008 in English and held by 39 libraries worldwide
We show how standard consumer and producer theory can be used to estimate welfare in insurance markets with selection. The key observation is that the same price variation needed to identify the demand curve also identifies how costs vary as market participants endogenously respond to price. With estimates of both the demand and cost curves, welfare analysis is straightforward. We illustrate our approach by applying it to the employee health insurance choices at Alcoa, Inc. We detect adverse selection in this setting but estimate that its quantitative welfare implications are small, and not obviously remediable by standard public policy tools
Not-so-classical measurement errors a validation study of Homescan by Liran Einav( Computer File )
8 editions published in 2008 in English and held by 38 libraries worldwide
We report results from a validation study of Nielsen Homescan data. We use data from a large grocery chain to match thousands of individual transactions that were recorded by both the retailer (at the store) and the Nielsen Homescan panelist (at home). First, we report how often shopping trips are not reported, and how often trip information, product information, price, and quantity are reported with error. We focus on recording errors in prices, which are more prevalent, and show that they can be classified to two categories, one due to standard recording errors, while the other due to the way Nielsen constructs the price data. We then show how the validation data can be used to correct the impact of recording errors on estimates obtained from Nielsen Homescan data. We use a simple application to illustrate the impact of recording errors as well as the ability to correct for these errors. The application suggests that while recording errors are clearly present, and potentially impact results, corrections, like the one we employ, can be adopted by users of Homescan data to investigate the robustness of their results
Learning from seller experiments in online markets by Liran Einav( Computer File )
5 editions published in 2011 in English and held by 35 libraries worldwide
The internet has dramatically reduced the cost of varying prices, displays and information provided to consumers, facilitating both active and passive experimentation. We document the prevalence of targeted pricing and auction design variation on eBay, and identify hundreds of thousands of experiments conducted by sellers across a wide array of retail products. We show how this type of data can be used to address questions about consumer behavior and market outcomes, and provide illustrative results on price dispersion, the frequency of over-bidding, the choice of reserve prices, "buy now" options and other auction design parameters, and on consumer sensitivity to shipping fees. We argue that leveraging the experiments of market participants takes advantage of the scale and heterogeneity of online markets and can be a powerful approach for testing and measurement
Sales taxes and internet commerce by Liran Einav( Computer File )
6 editions published in 2012 in English and held by 34 libraries worldwide
We estimate the sensitivity of Internet retail purchasing to sales taxes using data from the eBay marketplace. Our first approach exploits the fact that seller locations are revealed only after buyers have expressed interest in an item by clicking on its listing. We use millions of location "surprises" to estimate price elasticities with respect to the effective sales tax. We then use aggregated data to estimate cross-state substitution parameters, and substitution between offline and online purchases, relying on the variation in state and local sales taxes, and on changes in these rates over time. We find substantial sensitivity to sales taxes. Using our item-level approach, we find a price elasticity of around -2 for interested buyers. Using our aggregate approach, we find that a one percentage point increase in a state's sales tax increases online purchases by state residents by just under two percent, but decreases their online purchases from home-state retailers by 3-4 percent
How general are risk preferences? choices under uncertainty in different domains by Liran Einav( Computer File )
6 editions published in 2010 in English and held by 34 libraries worldwide
"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. We examine the extent to which an individual's actual insurance and investment choices display a stable ranking in willingness to bear risk, relative to his peers, across different contexts. We do so by examining the same individuals' decisions regarding their 401(k) asset allocations and their choices in five different employer-provided insurance domains, including health and disability insurance. We reject the null that there is no domain-general component of preferences. Among the five insurance domains, the magnitude of the domain-general component of preferences appears substantial; we find for example that one's choices in other insurance domains are substantially more predictive of one's choice in a given insurance domain than either one's detailed demographic characteristics or one's claims experience in that domain. However, we find considerably less predictive power between one's insurance choices and the riskiness of one's 401(k) asset allocations, suggesting that the common element of an individual's preferences may be stronger among domains that are "closer" in context. We also find that the relationship between insurance and investment choices appears considerably larger for employees who may be associated with better "financial sophistication." Overall, we view our findings as largely consistent with an important domain-general component of risk preferences"--National Bureau of Economic Research web site
The RAND health insurance experiment, three decades later by Aviva Aron-Dine( Computer File )
4 editions published in 2012 in English and held by 31 libraries worldwide
We re-present and re-examine the analysis from the famous RAND Health Insurance Experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending. We begin by summarizing the experiment and its core findings in a manner that would be standard in the current age. We then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms. Finally, we re-consider the famous RAND estimate that the elasticity of medical spending with respect to its out-of-pocket price is -0.2, emphasizing the challenges associated with summarizing the experimental treatment effects from non-linear health insurance contracts using a single price elasticity
The data revolution and economic analysis by Liran Einav( file )
3 editions published in 2013 in English and held by 27 libraries worldwide
Many believe that "big data" will transform business, government and other aspects of the economy. In this article we discuss how new data may impact economic policy and economic research. Large-scale administrative datasets and proprietary private sector data can greatly improve the way we measure, track and describe economic activity. They also can enable novel research designs that allow researchers to trace the consequences of different events or policies. We outline some of the challenges in accessing and making use of these data. We also consider whether the big data predictive modeling tools that have emerged in statistics and computer science may prove useful in economics
Sales mechanisms in online markets what happened to Internet auctions? by Liran Einav( file )
3 editions published in 2013 in English and held by 24 libraries worldwide
Consumer auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. Data from eBay shows that compositional shifts in the items being sold, or the sellers offering these items, cannot account for this evolution. Instead, the returns to sellers using auctions have diminished. We develop a model to distinguish two hypotheses: a shift in buyer demand away from auctions, and general narrowing of seller margins that favors posted prices. Our estimates suggest that the former is more important. We also provide evidence on where auctions still are used, and on why some sellers may continue to use both auctions and posted prices
The response of drug expenditures to non-linear contract design evidence from Medicare Part D by Liran Einav( Computer File )
3 editions published in 2013 in English and held by 15 libraries worldwide
We study the demand response to non-linear price schedules using data on insurance contracts and prescription drug purchases in Medicare Part D. Consistent with a static response of drug use to price, we document bunching of annual drug spending as individuals enter the famous "donut hole," where insurance becomes discontinuously much less generous on the margin. Consistent with a dynamic response to price, we document a response of drug use to the future out-of-pocket price by using variation in beneficiary birth month which generates variation in contract duration during the first year of eligibility. Motivated by these two facts, we develop and estimate a dynamic model of drug use during the coverage year that allows us to quantify and explore the effects of alternative contract designs on drug expenditures. For example, our estimates suggest that "filling" the donut hole, as required under the Affordable Care Act, will increase annual drug spending by $180 per beneficiary, or about 10%. Moreover, almost half of this increase is "anticipatory," coming from beneficiaries whose spending prior to the policy change would leave them short of reaching the donut hole. We also describe the nature of the utilization response and its heterogeneity across individuals and types of drugs
Uniform prices for differentiated goods : the case of the movie-theater industry by Liran Einav( Book )
5 editions published between 2001 and 2007 in English and held by 9 libraries worldwide
The effects of mandatory seat belt laws on driving behavior and traffic fatalities by Alma Cohen( Book )
6 editions published between 2001 and 2003 in English and held by 8 libraries worldwide
On the accuracy of Nielsen Homescan data by Liran Einav( Book )
2 editions published in 2008 in English and held by 5 libraries worldwide
 
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English (108)
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