Three Essays on Opioid Crisis: Theory and Experiments

Yue Deng

Advisor: Daniel E Houser, PhD, Department of Economics

Committee Members: Thomas Stratmann, Alex Tabarrok

Vernon Smith Hall (formerly Metropolitan Building), #5075
April 07, 2023, 09:30 AM to 11:30 AM


The opioid crisis is responsible for hundreds of thousands of deaths and trillions of dollars in costs. A feature of this crisis is substantial underground transactions, leaving standard empirical methods largely unable to capture the health impact of prescription opioids and their diversion into secondary markets. Laboratory experiments constitute a tool to offer insights difficult to obtain otherwise. This dissertation focuses on measuring the behavioral impact and health consequences of both the black market and quotas in the opioid crisis. The findings shed light on the role of relevant policies in the current crisis, and suggest paths for positive social change. 

Chapter 1 offers an analysis of the opioid-related economics literature detailing both the highly-discussed and seemingly under-emphasized topics. Further, this chapter complements the discussion of the economics literature by offering a review of studies by physician-scientists. As practitioners in the front line, physicians’ are able to provide new insights into policy consequences that contributes to debates across disciplines. Leveraging this literature, I present the new challenges and potential solutions for the rapidly-evolving opioid crisis and discuss the 'downstream' role of the government.
In chapter 2, I design a novel laboratory experiment that integrates the process of prescribing and diverting prescription opioids. Drawing on Schnell’s (2017) model, the experiment investigates how secondary market incentives affect patient and physician behaviors. I find that when a secondary market is present, patients visit physicians more frequently and physicians provide more prescriptions than when there is no secondary market available. Consequently, I find that shutting down this distribution channel reduces the total consumption of opioids, and positively impacts overall health outcomes. The results provide clear evidence that policies aimed at restricting secondary markets can contribute significantly to mitigating the opioid crisis.

In chapter 3, I extend Chapter 2’s study by incorporating quotas that limit opioid availability and a physician’s prescription capacity. By changing quotas in the lab, the experiment captures a quota’s impact on the patients’ and physicians’ behavior while also suggesting a quota’s overall health consequences. The result is that, when quotas are present, patients visit physicians less frequently and physicians prescribe more strictly. Further, quotas reduce the likelihood of diversion, suggesting that quotas reduce the responsibility of physicians’ prescription decisions on drug diversions. Overall, I find that introducing quotas reduces the total consumption of opioids as well as the probability of drug diversions, and that it positively impacts overall health outcomes.