Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery

David M. Cutler (), Robert Huckman and Jonathan T. Kolstad ()
Additional contact information
David M. Cutler: Harvard University
Jonathan T. Kolstad: The Wharton School, University of Pennsylvania

No 10-011, Harvard Business School Working Papers from Harvard Business School

Abstract: 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.

Pages: 43 pages
Date: 2009-07
New Economics Papers: this item is included in nep-com, nep-ent and nep-hea
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2010)
Working Paper: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2009)
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