Certification Intermediaries: Evidence from the Medical Device Industry
52 Pages Posted: 25 Jan 2015 Last revised: 14 Nov 2015
Date Written: November 13, 2015
In many industries, intermediaries assess and signal quality before new products are brought to market. We evaluate the extent to which certifiers can be relied upon to report product quality accurately when they strategically compete with each other for customers. This paper exploits a natural experiment based on the FDA's decision to allow private third parties to prepare certification reports for certain medical devices. We use comprehensive data on all US medical devices from 1998 to 2008. This policy led to significantly more adverse medical events for the affected devices. Our results indicate that the effect is larger in contexts where there is a larger benefit to the certifier from building a positive relationship with the medical device manufacturer.
Keywords: Medical Devices, Certification
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