Abstract
Research on consumer innovation in health care has shown that patients are important sources of new or improved treatments, care services and diagnostic tools. This paper points to another hitherto overlooked class of consumer innovation in health care, which we call collective consumer innovation. These self-organized service innovations emerge under regulatory constraints, occur on the system level, are collaborative, and tend to cause institutional change. We use historic and contemporary cases from the field of health care in order to document the importance of collective consumer innovation and devise a model to analyze their economic role.Collective consumer innovation is more likely under stricter regulation and when the production cost disadvantage of consumers vis-`a-vis the formal sector is smaller. The role of market size and the scale of technological change is more complex. If either is large, innovation will be undertaken by the formal sector, while no innovation at all takes place if either is small. The model demonstrates that consumer innovations can enhance social welfare by improving the tradeoff between safety and experimental leeway, though they under certain conditions can lower welfare. Empirically, there are numerous cases where collective consumer innovations in the form of novel health services, policies and governance systems were adapted by public or corporate health care providers.