Government Advertising in Market-Based Public Programs : Evidence from Health Insurance Marketplace

This paper studies government and private marketing activities in the context of the AffordableCare Act health insurance marketplace. Using detailed TV advertising data, we presentevidence that government and private advertising are targeted to different geographical areasand provide different messaging content. Then, we estimate the impacts of government andprivate advertising on consumer demand by exploiting discontinuities in advertising along theborders of local TV markets. We find that government advertising has a market-expansioneffect and enhances welfare. We also find that private advertising is not more effective thangovernment advertising in increasing total program enrollment. Although private advertisingis still effective in increasing insurer's own enrollment, it does not have positive spilloversto other insurers but has a modest business-stealing effect. We then develop and estimate anequilibrium model of marketplaces to illustrate mechanisms through which government advertisingaffects the market equilibrium. Our simulation suggests that government advertising cansimultaneously increase total program enrollment and reduce excessive advertising spendingamong private insurers