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Optomotrists tying services and products

Summary:
Like most people with vision problems, I get my eyes checked (services) by an optometrist. Consumers like me could get eyeglasses or contact lenses (products) from an optician, but often our optometrists' vertically integrate into the product to provide "one-stop shopping." Such a vertically integrated optometrist may want to blunt competition in the complementary product by steering consumers to their own products. One way to do this is to not release prescription information. This effectively ties the product to the service. How much more can optometrists earn from such a tying strategy?Norris & Timmons recently examined what happened when The Fairness to Contact Lens Consumers Act (FCLCA) of 2004 required the release of prescription information to patients. They compared states that

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Like most people with vision problems, I get my eyes checked (services) by an optometrist. Consumers like me could get eyeglasses or contact lenses (products) from an optician, but often our optometrists' vertically integrate into the product to provide "one-stop shopping." Such a vertically integrated optometrist may want to blunt competition in the complementary product by steering consumers to their own products. One way to do this is to not release prescription information. This effectively ties the product to the service. How much more can optometrists earn from such a tying strategy?

Norris & Timmons recently examined what happened when The Fairness to Contact Lens Consumers Act (FCLCA) of 2004 required the release of prescription information to patients. They compared states that had already had this requirement to "untie" to those that now must "untie."

We find that requiring professionals to release prescription information to patients resulted in a 13% reduction in the wages of optometrists. Our results provide some evidence that the FCLCA may have increased consumer welfare by reducing the prices of contact lenses or increasing access to contact lenses.

That ain't peanuts.

Hat tip: Marginal Revlolution

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