Working Papers
"Competition, Information, and Quality: Evidence from Nursing Homes" PDF
- Revisions Requested, Journal of Health Economics
[Abstract]
Economic theory suggests that competition and information disclosure can both be important for quality improvement, yet evidence on how they may interact to affect quality is sparse. This paper estimates the impact of nursing homes competition on their quality and how this impact varies as consumers have better access to quality information. To identify the effect of competition on quality, I use an Instrumental Variable (IV) derived from the estimation of demand, which is a function of exogenous travel distances between nursing homes and their potential consumers. The change in information is captured by the launch of the Five-Star Quality Rating System, which increased information transparency by lowering consumers’ learning costs. I find that while the effect of competition on nursing home quality is generally rather limited, this effect becomes significantly stronger with increased information transparency. The results suggest that regulations regarding quality rating and market structure are policy complements and should be considered jointly to best improve quality.
"(How) Does Payment Disclosure Affect Physician Behavior and Patient Welfare?" PDF
[Abstract]
This paper examines how physician behavior and patient welfare are affected by the disclosure of payments to physicians from pharmaceutical manufacturers. The disclosure policy aims to increase transparency and address potential bias in physician’s prescription behavior induced by the payments. While existing studies of the policy restrict to substitution patterns within drug categories, I consider how physicians may choose treatment options beyond medication such as surgery. In addition, I examine how patient welfares are affected accordingly, providing a more comprehensive evaluation of the disclosure policy. Using a patient level dataset of inpatient hospital care from 2006-2010, I compare the experience of heart disease patients in Vermont (a pioneer disclosure state) with that of New Hampshire (a neighbor control state). I find that payment disclosure leads to higher probabilities of surgery procedures and better health outcomes without significantly higher costs. The findings suggest that the disclosure policy motivates physicians to choose more appropriate treatment options.
"Pay-for-Delay Patent Settlements: Do They Harm or Benefit Consumers" PDF
[Abstract]
This paper examines how restrictions on drug patent settlement would affect firm strategies and consumer welfare. Generic companies can enter the market prior to patent expiration, if they challenge and invalidate the patent in court. In the settlement, brand-name pharmaceutical companies pay generic companies to avoid potential patent invalidation and to delay competition. Even though such settlement is traditionally believed to harm consumers, I show that allowing the settlement can improve consumer welfare by inducing more patent challenges. Using a game theoretical model, I demonstrate how the entry-inducing effect depends on factors such as litigation costs and patent strength. Contrary to conventional wisdom, the results suggest that patent settlement can benefit consumers even without considering its potential long-run benefit to increase innovation incentives.
"Competition, Information, and Quality: Evidence from Nursing Homes" PDF
- Revisions Requested, Journal of Health Economics
[Abstract]
Economic theory suggests that competition and information disclosure can both be important for quality improvement, yet evidence on how they may interact to affect quality is sparse. This paper estimates the impact of nursing homes competition on their quality and how this impact varies as consumers have better access to quality information. To identify the effect of competition on quality, I use an Instrumental Variable (IV) derived from the estimation of demand, which is a function of exogenous travel distances between nursing homes and their potential consumers. The change in information is captured by the launch of the Five-Star Quality Rating System, which increased information transparency by lowering consumers’ learning costs. I find that while the effect of competition on nursing home quality is generally rather limited, this effect becomes significantly stronger with increased information transparency. The results suggest that regulations regarding quality rating and market structure are policy complements and should be considered jointly to best improve quality.
"(How) Does Payment Disclosure Affect Physician Behavior and Patient Welfare?" PDF
[Abstract]
This paper examines how physician behavior and patient welfare are affected by the disclosure of payments to physicians from pharmaceutical manufacturers. The disclosure policy aims to increase transparency and address potential bias in physician’s prescription behavior induced by the payments. While existing studies of the policy restrict to substitution patterns within drug categories, I consider how physicians may choose treatment options beyond medication such as surgery. In addition, I examine how patient welfares are affected accordingly, providing a more comprehensive evaluation of the disclosure policy. Using a patient level dataset of inpatient hospital care from 2006-2010, I compare the experience of heart disease patients in Vermont (a pioneer disclosure state) with that of New Hampshire (a neighbor control state). I find that payment disclosure leads to higher probabilities of surgery procedures and better health outcomes without significantly higher costs. The findings suggest that the disclosure policy motivates physicians to choose more appropriate treatment options.
"Pay-for-Delay Patent Settlements: Do They Harm or Benefit Consumers" PDF
[Abstract]
This paper examines how restrictions on drug patent settlement would affect firm strategies and consumer welfare. Generic companies can enter the market prior to patent expiration, if they challenge and invalidate the patent in court. In the settlement, brand-name pharmaceutical companies pay generic companies to avoid potential patent invalidation and to delay competition. Even though such settlement is traditionally believed to harm consumers, I show that allowing the settlement can improve consumer welfare by inducing more patent challenges. Using a game theoretical model, I demonstrate how the entry-inducing effect depends on factors such as litigation costs and patent strength. Contrary to conventional wisdom, the results suggest that patent settlement can benefit consumers even without considering its potential long-run benefit to increase innovation incentives.