Productivity.

Members and guests of the NBER's Program on Productivity met in Cambridge on December 11. Program Director Zvi Griliches and Research Associate Ariel Pakes, both of NBER and Harvard University, chose the following papers for discussion:

Gregory Crawford, Duke University, and Matthew Shum, University of Toronto, "Uncertainty and Experimentation in Pharmaceutical Demand: Anti-Ulcer Drugs"

Discussant: Steven T. Berry, NBER and Yale University

Dan Ackerberg and Michael Riordan, Boston University, and Matilde Machado, Institute of Economic Analysis, Spain. "Estimation of a Production Process for a Health Care Treatment: Preliminary Analysis"

Discussant: Igal Hendel, NBER and Princeton University

Peter Davis, MIT, "The Welfare Effects of Market Discrimination in the Provision of Retail Service: Movie Theaters"

Discussant: Tom Holmes, University of Minnesota

Anne Gron, Northwestern University, "Cost Pass-Through in the U.S. Automobile Market"

Discussant: James A. Levinsohn, NBER and University of Michigan

Zvi Griliches; Tor Klette, Oslo University; and Jarle Moen, Norwegian School of Economics and Business Administration. "Evaluating the Effects of Government-Sponsored, Commercial R and D: Microeconometric Studies" (NBER Working Paper No. 6947)

Discussant: John Van Reenan, University of California, Berkeley

Different drugs have different effectiveness and different side effects, so uncertainty is an important component of prescription drug choice. This uncertainty can cause patients and doctors to experiment with various drugs until they find a good match. Crawford and Shum specify and estimate a dynamic model of pharmaceutical choice under uncertainty - one in which patients in the anti-ulcer drug market choose a drug in order to minimize the present discounted value of costs associated with treatment. The authors find that this market is split. For casual patients, quality differentials between drugs matter, since a high-quality drug can substantially lower the expected treatment length (and therefore the associated expected treatment costs).

Ackerberg, Riordan, and Machado study public funding of substance abuse treatment. Although the productivity of health care treatments is notoriously difficult to measure, the authors attempt to measure and compare the productivity of different treatment programs. They estimate their model using an admission-discharge dataset for patients receiving outpatient treatment for alcohol abuse provided by publicly...