Information, relative skill, and technology abandonment

We study the role of relative task-specific skill in explaining the heterogeneity in physicians’ technology abandonment decisions in response to negative information shocks. We show that after an unexpected FDA safety warning on the use of minimally invasive hysterectomies, physicians alter their procedural mix towards open procedures and away from the minimally invasive procedures. This effect is less pronounced for physicians more skilled in performing minimally invasive procedures relative to open procedures, highlighting relative skill as an explanation for differential technology abandonment. Since physicians with higher relative skill are more likely to use minimally invasive procedures before the FDA safety communication, we find that the FDA intervention led to a substantial increase in practice variation across physicians with different relative skill levels. These findings are consistent with a theoretical model that predicts physicians’ response to new information regarding the effectiveness of medical technology.