Health Care Management Papers

Document Type

Working Paper

Date of this Version

3-2016

Publication Source

National Bureau of Economic Research Working Paper Series

DOI

10.3386/w20981

Abstract

We propose a model where new product quality is uncertain, but market participants learn over time. Regulation balances information's role in reducing consumer risk versus reducing access to innovation. Using new data and variation between EU and US medical device regulations, we document patterns consistent with the model and estimate its parameters. We find: (1) without information from testing, risk would severely inhibit usage; (2) US policy maximizes total surplus in our estimated model while the EU could gain 20 percent with more pre-market testing; and (3) more “post- market surveillance” could increase surplus 24 percent.

Comments

This is a working paper, not accepted for publication or review.

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Date Posted: 27 November 2017