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This paper examines optimal regulatory testing requirements when new product quality is uncertain but market participants may learn over time. We develop a model capturing the regulator's tradeoff between consumer risk exposure and access to innovation. Using new data and exogenous variation between EU and US medical device regulatory rules, we document patterns consistent with our model and estimate its parameters. We find: without information from regulatory testing, risk shuts down the market; US policy is close to the one that maximizes a measure of welfare derived from our theoretical model and our empirical estimates; EU surplus could increase 20 percent with more pre-market testing; and "post-market surveillance" could increase surplus 24 percent.

Zonder onderwerpscode: economie

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This paper reviews the literature devoted to studying markets for health care services and health insurance. There has been tremendous growth and progress in this field. A tremendous amount of new research has been done in this area over the last 10 years. In addition, there has been increasing development and use of frontier industrial organization methods. We begin by examining research on the determinants of market structure, considering both static and dynamic models. We then model the strategic determination of prices between health insurers and providers where insurers market their products to consumers based, in part, on the quality and breadth of their provider network. We then review the large empirical literature on the strategic determination of hospital prices through the lens of this model. Variation in the quality of health care clearly can have large welfare consequences. We therefore also describe the theoretical and empirical literature on the impact of market structure on quality of health care. The paper then moves on to consider competition in health insurance markets and physician services markets. We conclude by considering vertical restraints and monopsony power.

Zonder onderwerpscode: economie

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Zonder onderwerpscode: economie

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In healthcare and other bilateral oligopoly markets, prices are often negotiated by the contracting parties. Many hospitals have merged in recent years in part to gain bargaining leverage with managed care organizations (MCOs), leading to several antitrust trials. We specify and estimate a bargaining model of competition between hospitals and MCOs using claims and discharge data from Northern Virginia. We find that MCO bargaining restrains hospital prices significantly relative to standard insurance. Increasing patient coinsurance tenfold would reduce prices by 16%. A proposed hospital acquisition that was challenged by the Federal Trade Commission would have significantly raised hospital prices.

Zonder onderwerpscode: economie