The Wharton School
University of Pennsylvania
3641 Locust Walk
Philadelphia, PA 19104
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|August 2018||Mergers and Marginal Costs: New Evidence on Hospital Buyer Power|
with Stuart Craig, Ashley Swanson: w24926
We estimate the effects of horizontal mergers on marginal cost efficiencies – an ubiquitous merger justification – using data containing supply purchase orders from a large sample of US hospitals 2009-2015. The data provide a level of detail that has been difficult to observe previously, and a variety of product categories that allows us to examine economic mechanisms underlying “buyer power.” We find that merger target hospitals save on average $176 thousand (or 1.5 percent) annually, driven by geographically local efficiencies in price negotiations for high-tech “physician preference items.” We find only mixed evidence on savings by acquirers.
|July 2018||Physician-Industry Interactions: Persuasion and Welfare|
with Kyle Myers, Ashley Swanson, Aaron Chatterji: w24864
In markets where consumers seek expert advice regarding purchases, firms seek to influence experts, raising concerns about biased advice. Assessing firm-expert interactions requires identifying their causal impact on demand, amidst frictions like market power. We study pharmaceutical firms' payments to physicians, leveraging instrumental variables based on regional spillovers from hospitals' conflict-of-interest policies and market shocks due to patent expiration. We find that the average payment increases prescribing of the focal drug by 73 percent. Our structural model estimates indicate that payments decrease total surplus, unless payments are sufficiently correlated with information (vs. persuasion) or clinical gains not captured in demand.
|February 2016||Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining|
with Ashley Swanson: w22039
Using a detailed dataset of hospitals' purchase orders, we find that information on purchasing by peer hospitals leads to reductions in the prices hospitals negotiate for supplies. Identification is based on staggered access to information across hospitals over time. Within coronary stents, reductions are concentrated among hospitals previously paying relatively high prices and for brands purchased in large volumes, and are consistent with resolving asymmetric information problems. Estimates across a large number of other important product categories indicate that the effects of information are largest in both absolute and relative terms for physician preference items (PPIs). Among PPIs, high-price, high-quantity hospital-brand combinations average 3.9 percent savings, versus 1.6 percent f...
|February 2015||Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices|
with Robert Town: w20981
We study the impact of regulating product entry and quality information requirements on an oligopoly equilibrium and consumer welfare. Requiring product testing can reduce consumer uncertainty, but it also increases fixed costs of entry and time to market. 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 pre-market testing. “Post-market surveillance” could further increase surplus.