Affiliation:
1. The Wharton School, University of Pennsylvania, and NBER (email: )
2. University of Texas-Austin, and NBER (email: )
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 European Union could benefit from more testing. “Post-market surveillance” could further increase surplus. (JEL D43, I18, L13, L51, L64, O31, O38)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
20 articles.
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