Publications
Publications
- 2009
Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery
By: David M. Cutler, Robert S. Huckman and Jonathan T. Kolstad
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.
Keywords
Health Care and Treatment; Market Entry and Exit; Duopoly and Oligopoly; Government Legislation; Mathematical Methods; Health Industry; Pennsylvania
Citation
Cutler, David M., Robert S. Huckman, and Jonathan T. Kolstad. "Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery." NBER Working Paper Series, No. 15214, August 2009.