1.Certificate of need laws are implemented at the state level, and serve to restrict market entry of certain health care providers/services (e.g., ICU beds, home health, ambulatory surgical centers). While the specific processes and services vary by state, the general mechanism is that a supplier/provider interested in providing a CON-regulated service in a state must demonstrate that there is unmet need in the current market. The stated goal of CON laws is to control costs by deterring duplication of services.

a)Describe how the aim of CON laws relates to the notion of the "medical arms race." How does this also have its roots in asymmetric information?

b)How does the concept of CON relate to "theorem of the second best"?

c)What might be a potential drawback of CON? Specifically, describe the extent to which CON may also thwart potentially positive, albeit imperfect, competitive forces.