Publication Type
Working Paper
Version
publishedVersion
Publication Date
8-2016
Abstract
This paper quantifies the welfare consequences of the medical arms race in the context of MRI adoption. We build and estimate a model of the vertical structure of the industry where MRI manufacturers sell high- and low-quality MRIs in the upstream market, whereas medical institutions provide medical services to patients in the downstream market. Simulation results suggest that the current free-entry policy in Japan leads to excess MRI adoption. Furthermore, regulating medical institutions’ MRI adoption, taxing MRI purchases, or softening competition among MRI manufacturers would increase social welfare substantially by mitigating the business-stealing effect in the downstream market.
Keywords
Vertical relationship, Free entry, MRI industry, Healthcare market.
Discipline
Industrial Organization
Research Areas
Applied Microeconomics
First Page
1
Last Page
39
Citation
ONISHI, Ken; WAKAMORI, Naoki; HASHIMOTO, Chiyo; and BESSHO, Shun-ichiro.
Free entry and social inefficiency in vertical relationships: The case of the Japanese MRI industry. (2016). 1-39.
Available at: https://ink.library.smu.edu.sg/soe_research/2068
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2016/2016cf1001.pdf