Essays On Firm, Worker And Consumer Decision-Making In On-Demand And Health Care Markets

Michal Hodor, University of Pennsylvania

Abstract

This thesis empirically studies two themes in the field of decision making. First, it investigates firm and worker behavior in an ``on-demand'' manufacturing environment (first chapter); second, it explores the effect of family spillovers on health care decision making (second chapter).

The first chapter develops and estimates a dynamic equilibrium model of firm and worker behavior in a production environment, by which manufacturing and supplying of products happens immediately after receiving orders. The firm solves a dynamic discrete choice cost minimization model in which it faces uncertainty about future product demand and workers' productive capacity. The firm chooses to employ two types of workers -- gig and permanent -- and it sets parameters of a compensation scheme that is a mix of salary and performance-based incentives to elicit worker effort. Heterogeneous workers solve a daily effort choice problem given the compensation scheme offered by the firm. I estimate the model using panel data from an online, global manufacturer that produces customized items. I find that gig workers are much more responsive to incentive pay. I show that varying compensation scheme over time and using a mix of gig and permanent workers provide the flexibility that the firm needs to effectively operate an on-demand production process.

The second chapter studies how family spillovers shape health care consumption through two sources: a learning channel whereby family members share information regarding their health insurance plan, and a behavioral channel whereby risk perception and habits are shared and transmitted. I exploit two types of sudden health shocks to identify a causal effect operating through each channel, and incorporate these shocks into event-study frameworks to quantify the effect of spillovers on non-injured adult family members. I find a significant behavioral spillover effect of a more than 70% increase in medical spending of preventive care over a two-year horizon. Moreover, I find a persistent spillover effect associated with the learning channel that amounts to an average increase in medical spending of more than 100% relative to prior to the health shock. While the first result is in line with previous findings in the literature, the second is novel.