Contributions

  • Huckman, Robert S. - Contributor
  • Kolstad, Jonathan T. - Contributor
  • Harvard Business School - Contributor

Publication

2009 - Harvard Business School, Boston, Massachusetts

Language

English

Word Count

7,750 words, Guess

Page Count

31 pages

Identifiers

Description

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.

Subjects

Series Statement

  • Working paper / Harvard Business School -- 10-011

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