Quality and consumer learning in the
market for in vitro fertilization
David Howard
Emory University
Gary Jeng
CDC
Are patients good consumers?
In most commodities, the possibility of learning from
one’s own experience or that of others is strong
because there is an adequate number of trials. In the
case of severe illness, that is, in general, not true; the
uncertainty due to inexperience is added to the
intrinsic difficulty of prediction.
-Kenneth Arrow 1965
Strategy
Do experienced patients switch to better clinics?
If yes, then patients are learning through
experience
If experience is a source of learning, then first time
patients are not fully informed
The sample
Nearly 100% sample of the women who received
their first IVF cycle in 2004-2005
85,718 patients
40,321 has more than one cycle
4,732 switched clinics
Overview of analyses
A. Describe switching patterns
B. Estimate determinants of switching
C. Estimate choice model
A. Switching patterns
Cycle
By total cycles
Patients Switchers %
By cycle at switch
Cycles Switches %
2
3
4
5+
22,135
10,559
4,548
3,079
1,370
1,508
987
867
0.06
0.14
0.22
0.28
40,376
18,350
7,824
5,572
2,230
1,574
715
519
0.06
0.09
0.09
0.09
Total
40,321
4,732
0.12
72,122
5,038
0.07
A. Switching patterns
Cycle
By total cycles
Patients Switchers %
By cycle at switch
Cycles Switches %
2
3
4
5+
22,135
10,559
4,548
3,079
1,370
1,508
987
867
0.06
0.14
0.22
0.28
40,376
18,350
7,824
5,572
2,230
1,574
715
519
0.06
0.09
0.09
0.09
Total
40,321
4,732
0.12
72,122
5,038
0.07
B. Determinants of switching
Pr(switch) = f(attributes of the previous clinic,
patient characteristics)
B. Determinants of switching
Pr(switch) = f(attributes of the previous clinic,
patient characteristics)
1. Patients treated at clinics with lower quality are
slightly more likely to switch
B. Determinants of switching
Pr(switch) = f(attributes of the previous clinic,
patient characteristics)
1. Patients treated at clinics with lower quality are
slightly more likely to switch
2. Patients whose previous IVF cycle resulted in
pregnancy w/ miscarriage (versus no pregnancy)
are less likely to switch.
B. Determinants of switching
Pr(switch) = f(attributes of the previous clinic,
patient characteristics)
1. Patients treated at clinics with lower quality are
slightly more likely to switch
2. Patients whose previous IVF cycle resulted in
pregnancy w/ miscarriage (versus no pregnancy)
are less likely to switch.
-bad experiences prompt search
C. Mixed multinomial logit model
Pr(patient i chooses clinic j) = f(clinic attributes,
patient characteristics)
Chose sets constructed based on a 150 mile
radius around patients’ homes, limited to a
maximum of 20 clinics
One observation for each clinic-patient pair
Estimates obtained via simulated maximum
likelihood
Results from the choice model
If a clinic increased its success rate by one
standard deviation, how much would demand
increase:
25%, among first-time patients
27%, among experienced patients
Conclusions
Imagine the market for IVF was comprised entirely
of experienced patients. Would clinics face a
stronger incentive to improve quality?
Conclusions
Imagine the market for IVF was comprised entirely
of experienced patients. Would clinics face a
stronger incentive to improve quality?
No.
Demand among experienced patients is only
slightly more responsive to quality than demand
among first-time patients.
Most clinics would probably not perceive a
difference.
Conclusions
We observe some evidence of learning: 12% of
patients switch.
Why don’t more patients switch:
1.First time patients are well-informed.
2.Switching costs limit the ability of experienced
patients to act upon their superior knowledge.