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6. Acton and Goldman-Smith

6. Acton and Goldman-Smith - Acton(1975 Availability of...

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Acton (1975) Availability of insurance and rising wages suggest that time price is an important determinant of demand for medical services. Max U(m, X) s.t. (p + wt)m + (q + ws)X = Y Model predicts that as money prices of medical services fall, consumers become more sensitive to time price.
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Travel time, waiting time, time spent receiving care may affect demand. Acton focuses on the distance from household to clinic as a measure of time. Studies demand for city hospital outpatient services in New York.
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Theoretical Model Predictions As money prices fall, demand becomes more responsive to changes in time price. (i.e. demand for free services more sensitive to price compared to demand for services that are not free) Wages have two opposing effects - increase income and increase opportunity cost of time.
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Estimation Used data from a 1965 survey of users of outpatient departments at New York City hospitals.
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