Monday 20 March 2023 12:00 - 13:30

This event is both online and in person

SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

Personalizing policies can theoretically increase their effectiveness. However, personalization is difficult when policies are vertically-differentiated and beneficiaries' types are unobservable, since beneficiaries may misreport their types to access the most generous policy variant. Mechanism design offers a strategy to overcome this issue: offer a menu of policy choices, and make it incentive-compatible for participants to choose the "right' variant (i.e., 2nd-degree price discrimination). Using a randomized controlled trial of incentives for exercise among roughly 6,000 adults with diabetes and hypertension in urban India, we show that 2nd-degree price discrimination substantially improves program performance, increasing the treatment effect on exercise by 75% without increasing program costs relative to a one-size-fits-all benchmark. Second-degree price discrimination is effective because, consistent with mechanism design theory, it induces beneficial sorting of types across contracts. Second-degree price discrimination also performs favorably relative to another potential strategy for personalization: tagging based on observables (i.e., 3rd-degree price discrimination).

Participants are expected to adhere to the CEP Events Code of Conduct.

Directions

This event will take place in SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

This series is part of the CEP's Labour Markets programme.