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In 1996, free choice of health insurers was introduced to the German social health insurance system. One objective was to increase efficiency through competition. A crucial precondition for effective competition among health insurers is that consumers search for lower-priced health insurers. We test this hypothesis by estimating the price elasticities of insurers’ market shares. We use unique panel data and specify a dynamic panel model to explain changes in market shares. Estimation results suggest that short-run price elasticities are smaller than previously found by other studies. In the long-run, however, estimation results suggest substantial price effects. Copyright & 2006 John Wiley & Sons, Ltd.