The Welfare Effects of Price Discrimination Under Endogenous Product Entry: the case of Implantable Medical Devices

Grant description:

This project seeks to answer two questions: What are the welfare effects of third-degree price discrimination, and what are the effects of third-degree price discrimination on the take-up of newer and better technologies? Goel will address this question in the context of a particular type of implantable medical device: defibrillators. The implantable medical device industry has three features that make it a compelling setting to study. First, manufacturers are able to prevent hospitals from disclosing prices, allowing them to charge different prices for the same device in different hospitals. Second, the industry is very concentrated, with more than 95 percent of the market share captured by just four firms. And third, there is a lot of product variety. On average, a manufacturer offers six brands of this particular device per year from 2014–2019. Goel will utilize a rich dataset with purchase volumes, prices, and characteristics of defibrillators, and will combine this with approval information from the U.S. Food and Drug Administration. She will then estimate a model of supply and demand, and conduct a counterfactual analysis in which third-degree price discrimination is banned in order to understand the dynamics of price discrimination.