Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices

Matthew Grennan and Robert Town

No 20981, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the impact of regulating product entry and quality information requirements on an oligopoly equilibrium and consumer welfare. Product testing can reduce consumer uncertainty, but also increase entry costs and delay entry. Using variation between EU and US medical device regulations, we document patterns consistent with valuable learning from more stringent US requirements. To derive welfare implications, we pair the data with a model of supply, demand, and testing regulation. US policy is indistinguishable from the policy that maximizes total surplus in our estimated model, while the EU could benefit from more testing. “Post-market surveillance” could further increase surplus.

JEL-codes: I11 L11 L51 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind and nep-mfd
Note: EH IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Matthew Grennan & Robert J. Town, 2020. "Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices," American Economic Review, vol 110(1), pages 120-161.

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Journal Article: Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices (2020)
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