Arbeitspapier
An economic theory of statistical testing
This paper models the use of statistical hypothesis testing in regulatory approval. A privately informed agent proposes an innovation. Its approval is beneficial to the proponent, but potentially detrimental to the regulator. The proponent can conduct a costly clinical trial to persuade the regulator. I show that the regulator can screen out all ex-ante undesirable proponents by committing to use a simple statistical test. Its level is the ratio of the trial cost to the proponent's benefit from approval. In application to new drug approval, this level is around 15% for an average Phase III clinical trial.
- Language
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Englisch
- Bibliographic citation
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Series: cemmap working paper ; No. CWP50/16
- Classification
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Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Tetenov, Aleksey
- Event
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Veröffentlichung
- (who)
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Centre for Microdata Methods and Practice (cemmap)
- (where)
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London
- (when)
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2016
- DOI
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doi:10.1920/wp.cem.2016.5016
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Tetenov, Aleksey
- Centre for Microdata Methods and Practice (cemmap)
Time of origin
- 2016
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