Free Entry and Social Inefficiency in Vertical Relationships: The Case of the MRI Market
2016/05/03
研討會日期 : 2016-05-03
時間 : 14:30
主講人 : Professor Naoki Wakamori
主持人 : Professor Stacey Chen
地點 : Conference Room B110
演講者簡介 : Prof. Wakamori received his Ph.D. in Economics from University of Pennsylvania in 2011. He is currently an Assistant Professor at University of Tokyo. His research fields are Industrial Organization, Financial Economics, and Empirical Microeconomics.
演講摘要 : This paper quantifies the social inefficiency that arises from the medical arms race in the context of MRI adoption. We construct a novel dataset that contains a complete list of medical institutions and includes their characteristics, MRI ownership and utilization information, and data on patient co-payments and medical institution reimbursements. Using the data, the paper builds and estimates a vertical industry model where MRI manufacturers sell MRIs and hospitals purchase MRIs ("free entry") in the upstream market, and hospitals provide medical services to patients in the downstream market. The estimated model allows us to evaluate potential policy interventions. Simulation results suggest that the current "laissez-faire" policy in Japan leads to excess MRI adoption, resulting in lower social welfare compared the regulation style used in France. Furthermore, softening competition in the upstream market via collusive agreement or mergers among upstream firms would increase social welfare substantially by reducing excess MRI adoption and mitigating the business-stealing effect in the downstream market. These findings shed light on the mechanism behind the social inefficiency of medical arms races and offer new insight into antitrust policies in industries with vertical structure.
