NATIONAL BUREAU OF ECONOMIC RESEARCH
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Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices

Matthew Grennan, Robert Town

NBER Working Paper No. 20981
Issued in February 2015, Revised in June 2019
NBER Program(s):The Health Care Program, The Industrial Organization Program

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.

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Document Object Identifier (DOI): 10.3386/w20981

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