Faculty & Research
Joshua R. Schwartzstein

Joshua R. Schwartzstein

Jakurski Family Associate Professor of Business Administration

Jakurski Family Associate Professor of Business Administration

Negotiation, Organizations & Markets
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Joshua R. Schwartzstein
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(617) 496-5910
Publications Research Summary Awards & Honors

Journal Articles
Journal Articles

Book Chapters
Book Chapters

Working Papers
Working Papers

Cases and Teaching Materials
Cases and Teaching Materials

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Joshua Schwartzstein is an associate professor of business administration in the Negotiation, Organizations & Markets Unit. Before joining HBS, he was an assistant professor of economics at Dartmouth College.

Professor Schwartzstein’s primary research area is behavioral economics. He focuses on incorporating more psychologically realistic assumptions into economic models, and on applying these models to shed light on market outcomes and optimal public policy. In recent work, he has studied how the recognition that people make mistakes in medical-care decisions affects the analysis of health insurance policies, how relative thinking influences consumer choice, and how selective attention impacts the way people learn to use technologies. His research has appeared in the Quarterly Journal of Economics, the Journal of the European Economic Association, the Annual Review of Economics, and the Journal of Law and Economics. It has also been referenced in The New York Times, Science, and Health Affairs.

Professor Schwartzstein holds a PhD in economics from Harvard University and a BA in behavioral economics, economics, and mathematics from Cornell University.

Journal Articles
Book Chapters
Working Papers
Cases and Teaching Materials
Research Summary
Overview
Professor Schwartzstein uses the lens of behavioral economics to build more psychologically accurate assumptions into economic models, and he applies these models to create a more realistic understanding of market outcomes and optimal public policy.
Behavioral Hazard and Public Policy

It is well recognized that people overuse low-value medical care due to moral hazard—because copays are lower than costs. Now Professor Schwartzstein has introduced the concept of “behavioral hazard” to explain the opposite: people underuse high-value care because they underweight the benefits of, for example, taking medications for chronic diseases like diabetes or hypertension. He has derived optimal copay formulas that incorporate both moral and behavioral hazard. When both are taken into account, health insurance can do more than provide financial protection: it can also improve health care efficiency. Professor Schwartzstein’s findings and methods can be applied to other forms of social insurance and public policy problems.

Relative Thinking and Consumer Choice

Fixed differences appear smaller when compared to large differences. Professor Schwartzstein has proposed a model of relative thinking, in which a person weighs a given change by less when he compares it to a larger range. Relative thinking implies that a person is less likely to exert effort in a money-earning activity if he had expected to earn higher returns or if there is greater income uncertainty. Relative thinking also induces a tendency to overspend, and for a person to spend more freely if she is infrequently allotted large amounts to consume rather than frequently allotted small amounts. The model clarifies issues ranging from why insurance can encourage investment to the optimal scheduling of entitlements distributions.

Selective Attention and Learning

What do we notice, and how does this affect what we learn? Standard economic models of learning ignore memory by assuming that we remember everything. But there is growing recognition that memory is imperfect. Further, memory imperfections do not stem from limited recall alone; rather, not all information will be encoded into memory. Professor Schwartzstein has developed a model of belief formation that recognizes that attention is selective, and that we narrow our attention to what we currently believe is worthwhile. This model makes predictions about when people will attend to the right variables, when they will not, and what biased ideas may result. The key insight is that such inattention may compound itself—a person may persistently fail to learn what is worth attending to. In experimental research, Professor Schwartzstein has shown that seaweed farmers in Indonesia consistently failed to recognize a key variable in optimizing production—and that they did respond based on seeing summaries of the researchers’ data.

Awards & Honors
Received Honorable Mention in 2016 for the Arrow Award for Best Paper in Health Economics from the International Health Economics Association for “Behavioral Hazard in Health Insurance” (Quarterly Journal of Economics, November 2015) with K. Baicker and S. Mullainathan.
Additional Information
Additional Information