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

Jonathan Kolstad, David M. Cutler and Robert Steven Huckman

Scholarly Articles from Harvard University Department of Economics

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 this entry was approximately welfare neutral.

Date: 2010
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Citations: View citations in EconPapers (33)

Published in American Economic Journal: Economic Policy

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Working Paper: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:5344226

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