Information to Increase Therapy Demand
Introduction
Roth et. al. (2024) executes a randomized controlled trial to estimate the effect of information on depressed individuals’ willingness to pay for therapy. The RCT assigns a sample of depressed people who have never tried therapy before to either a control group or an information group. Only the information group is told that a review of the literature shows that “out of the 22 clinical studies with at least a hundred participants, all 22 studies find that therapy is an effective treatment for depression.” Both groups then complete survey questions that elicit their willingness-to-pay for therapy using the Becker-DeGroot-Marschak mechanism. The difference between these two groups’ willingness-to-pay is $10 out of a $320 cost for four weeks of therapy. The paper interprets this as evidence that information increases demand for therapy by shifting people’s attention and beliefs.
The survey allows the paper to estimate the MVPF for a policy providing information about the effectiveness of therapy for treating depression, assuming subsidies for therapy are already in place. The paper estimates MVPFs for providing information assuming a variety of baseline subsidy levels; in the description below, we focus on a policy giving information on top of a $70 subsidy for the $320 cost of four weeks of therapy.
The paper also constructs separate MVPFs for providing therapy subsidies and a combined policy providing both information and subsidies.
MVPF = 1.0
Net Cost
The paper estimates the direct cost of information policy as the percent of people who are induced to take up therapy by the information multiplied by the subsidy amount, as well as the cost of providing information.
1.7% of people are compliers to the information policy. The paper estimates the cost of providing information as $1 per person.
This leads to a net cost of 0.017*$70 + 1 = $2.19.
In some of the estimates, the paper additionally includes a fiscal externality of increased tax revenues due to productivity gains from depressed individuals seeking therapy. Assuming an effective 20% tax rate on the gains accruing due to compliers leads to increased tax revenue of $1.08. This assumption yields a net cost of $1.11.
Finally, the paper accounts for a scenario where depressed individuals seeking therapy will have positive externalities on other individuals such as friends or employers. Including the assumption that these positive externalities would yield additional productivity gains leads to an additional $0.55 in tax revenue and a net cost of $0.57.
Willingness to Pay
Compliers gain the surplus of their individual willingness-to-pay minus the subsidized cost of therapy. The paper also assumes these individuals seeking therapy will have a positive externality on other individuals such as friends or employers. The paper estimates this externality as an additional benefit equivalent to 50% of the individual’s willingness to pay. The average individual willingness-to-pay for a complier is $253.8. This means that the total benefits of the policy for a complier are (1+0.5)*253.8 – (320 – 70) = $130.70.
Multiplying by the share of individuals who are compliers leads to a willingness-to-pay of 0.017*$130.70 = $2.22
In some of estimates, the paper conservatively estimates there are no positive externalities. That assumption leads to a willingness-to-pay of $0.065.
MVPF Summary
The MVPF for the information policy assuming a $70 underlying subsidy, no productivity impacts, and a 50% externality is 1.017.
- Assuming productivity impacts and a 50% externality leads to an MVPF estimate of 3.920.
- Assuming productivity impacts but not externalities leads to an MVPF estimate of 0.059.
- Assuming no productivity impacts and no externalities leads to an MVPF estimate of 0.030.
The paper offers MVPF estimates varying other assumptions as well:
- Estimating the direct cost of the information as $5 per person (instead of $1) leads to MVPFs ranging from 0.011 to 0.602.
- At a $20 subsidy level, the information treatment does not induce anyone to take up therapy, so the MVPF is 0. However, between $70 and the full cost of $320 (holding the assumptions of no productivity impacts and a 50% externality fixed), the MVPF estimates are decreasing in the level of the subsidy from 1.017 to 0.077.
References
Roth, Christopher, Peter Schwardmann, and Egon Tripodi (2024). “Misperceived Effectiveness and the Demand for Psychotherapy.” Journal of Public Economics: Vol. 240 (105254). DOI: https://doi.org/10.1016/j.jpubeco.2024.105254
Policy Features
- Category
- In Kind Transfers
- Sub-Category
- Health Adult
- Beneficiary Type(s)
- Adults
- Average Age
- 30
- Country of Implementation
- United States
- Empirical Method
- RCT
- Research Type
- Primary
- Peer Reviewed
- No
- MVPF Publication Link
- doi.org/10.1016/j.jpubeco.2024.105254