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Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery
- American Economic Journal: Economic Policy
"... Prior studies suggest that with elastically supplied inputs free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms und ..."
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Prior studies suggest that with elastically supplied inputs free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher quality surgeons, and that this entry was approximately welfare neutral. (JEL I11, L13) The classic welfare analysis of firm entry involves a trade-off between the benefits of competition and losses from rent seeking. The benefits of competition are straightforward. The rent-seeking losses stem from the fact that part of an entrant’s profit is generated by stealing business from incumbent firms. These transferred profits are not a social benefit, but the fixed outlays associated with entry
Incentives and Targets in Hospital Care: Evidence from a Natural Experiment
, 2008
"... The Centre for Market and Public Organisation (CMPO) is a leading research centre, combining expertise in economics, geography and law. Our objective is to study the intersection between the public and private sectors of the economy, and in particular to understand the right way to organise and deli ..."
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Cited by 14 (0 self)
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The Centre for Market and Public Organisation (CMPO) is a leading research centre, combining expertise in economics, geography and law. Our objective is to study the intersection between the public and private sectors of the economy, and in particular to understand the right way to organise and deliver public services. The Centre aims to develop research, contribute to the public debate and inform policy-making. CMPO, now an ESRC Research Centre was established in 1998 with two large grants from The Leverhulme Trust. In 2004 we were awarded ESRC Research Centre status, and CMPO now combines core funding from both the ESRC and the Trust. Centre for Market and Public Organisation
Information and Quality when Motivation is Intrinsic: Evidence from Surgeon Report Cards”, Working Paper
"... Abstract: If profit maximization is the objective of a firm, new information about quality should affect firm behavior only through its effects on market demand. I consider an alternate model in which suppliers are motivated by a desire to perform well in addition to profit. A simple model demonstra ..."
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Abstract: If profit maximization is the objective of a firm, new information about quality should affect firm behavior only through its effects on market demand. I consider an alternate model in which suppliers are motivated by a desire to perform well in addition to profit. A simple model demonstrates the way in which performance data can alter both pecuniary incentives (i.e. extrinsic motivation) and incentives unrelated to profit (i.e. intrinsic motivation). The introduction of quality “report cards ” for cardiac surgery in Pennsylvania provides an empirical setting to test for an effect of new information on quality (mortality) and to isolate the relative role of extrinsic (demand side) and intrinsic (supply side) incentives in determining surgeon response to new information. Using a structural demand system, I estimate the profit incentives facing each surgeon from the introduction of report cards. Extrinsic incentives due to quality reporting led to a.09 percentage point (three percent) decline in mortality. Consistent with a mixed model of objectives, information on performance that was new to surgeons and unrelated to patient demand led to an intrinsic response three times as large as surgeon response to profit incentives. Key Words: demand estimation; intrinsic motivation; health care; quality competition
Price and quality in spatial competition
- Regional Science and Urban Economics
, 2010
"... We study the relationship between competition and quality within a spatial com-petition framework where
rms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including util-ity functions that are non-linear in income and ..."
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Cited by 5 (1 self)
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We study the relationship between competition and quality within a spatial com-petition framework where
rms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including util-ity functions that are non-linear in income and cost functions that are non-separable in output and quality. Our main message is that the scope for a positive relationship between competition and quality is underestimated in the existing literature. If we allow for income e¤ects by assuming that utility is strictly concave in income, we nd that lower transportation costs always lead to higher quality. The presence of in-come e¤ects might also reverse a previously reported negative relationship between the number of
rms and equilibrium quality. This reversal result is further strenghtened if there are cost substitutabilities between output and quality. Equilibrium quality provision is always less than socially optimal in the presence of income e¤ects.
Competition and quality in regulated markets: a differential game approach, CEPR w.p
, 2008
"... This series consists of papers with limited circulation, intended to stimulate discussion. Competition and quality in regulated markets: a differential-game approach ..."
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This series consists of papers with limited circulation, intended to stimulate discussion. Competition and quality in regulated markets: a differential-game approach
2012), “The effect of deregionalization on health outcomes: Evidence from neonatal intensive care,” Mimeo
"... The number of neonatal intensive care units (NICUs) in smaller, community hospitals increased greatly during the 1980s and 1990s, attracting deliveries away from hospitals with the most sophisticated NICUs. In this paper I estimate the causal effect on mortality of the level of care available at the ..."
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The number of neonatal intensive care units (NICUs) in smaller, community hospitals increased greatly during the 1980s and 1990s, attracting deliveries away from hospitals with the most sophisticated NICUs. In this paper I estimate the causal effect on mortality of the level of care available at the hospital in which a very low birth weight infant is born. I exploit exogenous variation in distance from a mother’s residence to hospitals offering each level. In contrast to previous estimates, these instrumental variables estimates suggest no differences in outcomes by level of neonatal care at the delivery hospital. ∗Acknowledgments: I am particularly indebted to Judy Hellerstein, Ginger Jin, and Melissa Kearney for
Does a hospital’s quality depend on the quality of other hospitals? A spatial econometrics approach to investigating hospital quality competition
, 2013
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Productivity in Public Services
, 2006
"... The Centre for Market and Public Organisation (CMPO) is a leading research centre, combining expertise in economics, geography and law. Our objective is to study the intersection between the public and private sectors of the economy, and in particular to understand the right way to organise and deli ..."
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Cited by 2 (0 self)
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The Centre for Market and Public Organisation (CMPO) is a leading research centre, combining expertise in economics, geography and law. Our objective is to study the intersection between the public and private sectors of the economy, and in particular to understand the right way to organise and deliver public services. The Centre aims to develop research, contribute to the public debate and inform policymaking. CMPO, now an ESRC Research Centre was established in 1998 with two large grants from The Leverhulme Trust. In 2004 we were awarded ESRC Research Centre status, and CMPO now combines core funding from both the ESRC and the Trust. Centre for Market and Public Organisation
Hospital Quality Competition Under Fixed Prices CHE Research Paper 80Hospital quality competition under fixed prices
"... CHE Discussion Papers (DPs) began publication in 1983 as a means of making current research material more widely available to health economists and other potential users. So as to speed up the dissemination process, papers were originally published by CHE and distributed by post to a worldwide reade ..."
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CHE Discussion Papers (DPs) began publication in 1983 as a means of making current research material more widely available to health economists and other potential users. So as to speed up the dissemination process, papers were originally published by CHE and distributed by post to a worldwide readership. The CHE Research Paper series takes over that function and provides access to current research output via web-based publication, although hard copy will continue to be available (but subject to charge). Disclaimer Papers published in the CHE Research Paper (RP) series are intended as a contribution to current research. Work and ideas reported in RPs may not always represent the final position and as such may sometimes need to be treated as work in progress. The material and views expressed in RPs are solely those of the authors and should not be interpreted as representing the collective views of CHE research staff or their research funders. Further copies Copies of this paper are freely available to download from the CHE website
