INFORMATION PROVISION: Maximum Price

Posted by Kathryn Schwartz on August 02, 2014
INFORMATION PROVISION

We find that R&Rs significantly reduce maximum price for infant and toddler care. The table below summarizes predicted effects along with standard errors, for markets with and without R&Rs. The presence of R&Rs reduces maximum price by 35%, from $100.17 to $64.68 per week, in markets for infant care, and it reduces maximum price by 29%, from $106.41 to $75,047 per week, in markets for toddler care. These findings are consistent with predicted effects of information provision and provide even stronger evidence that parents who value quality care highly are willing to bear substantial search costs to find care for their youngest children.

Predicted Maximum Prices

(Standard Errors in Parentheses)
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There is also evidence that R&Rs reduce maximum price for school-age care, by 45%, from $93.54 to $51.01. Finally, there is no statistical evidence that R&Rs affect the maximum price for preschooler care. This latter result provides further support for the contention that parents who value high quality care are less willing to search assiduously to find care for their older children.

Average Price

We find that R&Rs reduce average market price, however these findings are not statistically significant at conventional levels. These results can be interpreted as indicating that even for their youngest children, parents who value quality highly are not willing to bear sufficient search costs. Consequently, the prices of higher quality firms do not rise by enough to significantly offset the decline in prices at lower quality firms.
The table below summarizes predicted effects, using market-level results, along with standard errors. Point estimates suggest that R&Rs reduce the average price of infant care by 11%, of toddler care by 6%, of preschooler care by 5%, and of school-age care by 18%.

Predicted Average Prices

(Standard Errors in Parentheses)
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