Economic Welfare and the Production of Information by a Monopolist: The Case of Drug Testing

Kwerel, Evan

doi:10.2307/3003376

Cited by 7 publications

(4 citation statements)

References 2 publications

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“…Thus, e ~ > e* as previous literature, Arrow (1962), Kwerel (1980), andNelson (1959), would suggest. However, with imperfect liability and linear demand, e ~ and e* cannot be ordered.…”

supporting

confidence: 50%

“…Next, it is of interest to compare the first-best level of testing effort with that which is chosen by a monopolist. In Kwerel (1980) and in other contexts, for example Nelson (1959) and Arrow (1962), monopolistic firms tend to produce less than the socially optimal amount of information. In the present model, IV" < 0 implies that …”

Section: W(e) = E(ts I (A*) -E) = ~[Otsa(qa) + (1 -O)tsb(qb )]mentioning

confidence: 99%

“…While there is a general descriptive literature (see e.g., Grabowski and Vernon (1983) and their references), to our knowledge, the only analytical treatment of this specific topic is the paper by Kwerel (1980). He formulates a model of a drug-testing monopoly and characterizes profit maximal and second-best regulated testing efforts under the assumption that the monopolist is free to set price and output in each solution.…”

Section: Introductionmentioning

confidence: 99%

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Welfare and product testing by a regulated monopolist

1991

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This paper studies a monopoly firm with the ability to conduct costly pre-market testing of its product in order to predict how safe this product is to consume. While there are private incentives to test, the amount of testing effort supplied by a monopolist need not be optimal. In a model which allows for an imperfect system of liability, we characterize and compare the allocations of testing effort and output at the full social optimum, the pure monopoly solution, and the second-best regulated optimum wherein the regulator chooses testing effort and the monopolist chooses output and price.

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“…Thus, e ~ > e* as previous literature, Arrow (1962), Kwerel (1980), andNelson (1959), would suggest. However, with imperfect liability and linear demand, e ~ and e* cannot be ordered.…”

supporting

confidence: 50%

Section: W(e) = E(ts I (A*) -E) = ~[Otsa(qa) + (1 -O)tsb(qb )]mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Welfare and product testing by a regulated monopolist

1991

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“…Instead, it is relevant to ask who in the population should be given the treatment. See the paper by Kwerel 5 for an early discussion in the economics literature of this problem and also chapter 24 of Statistical Issues in Drug Development 6 . However, if Assumption 3 applies, then the distinction between conditional and marginal estimates is moot anyway.…”

mentioning

confidence: 99%