Consider the symmetric equilibrium of a monopolistically competitive industry in which manufacturers select price and quality to maximize expected profit and consumers maximize utility by conducting costly search among sellers using an optimal sequential search role. Consumers search among...

Since the Food and Drug Administration (FDA) Amendments of 1962, the average time from a drug's first worldwide patent application to its approval by the FDA has risen from 3.5 to 13.5 years. FDA policies and manufacturers' incentives suggest that more important drugs may have reached the market...

Recent attention has been given to the hypothesis that local hospital competition takes the form of costly duplication of specialized services -- the "medical arms race." This contrasts with the hypothesis that the supply of specialized services is determined solely by "the extent of the...

Under the system of hospital reimbursement for Medicare patients, hospitals receive a prospectively determined price that varies according to the diagnosis related group (DRG) to which the patient is assigned. Rate-setting by DRG encourages hospitals to specialize in those DRGs for which they...

We call markets in which intermediaries sell networks of suppliers to consumers who are uncertain about their needs "option demand markets." In these markets, suppliers may grant the intermediaries discounts in order to be admitted to their networks. We derive a measure of each supplier's market...

Estimated responses to report cards may reflect learning about quality that would have occurred in their absence (market-based learning). Using panel data on Medicare HMOs, we examine the relationship between enrollment and quality before and after report cards were mailed to 40 million Medicare...