Information Failures: Going Under the Knife

Edgar Von Ottenritter chooses plastic surgery as his example of possible information failures in markets. A case of information failure which I find to be especially interesting is in the market for cosmetic surgery procedures. In the UK about 100,000 cosmetic surgery procedures are performed annually and the number is growing rapidly. The number of breast enlargement procedures performed annually has tripled since 2002, and the market has grown from being worth 143m in 2002 to being worth £1.2bn in 2009.

The market is booming, this is true, but medical professionals and government organizations fear that people are not fully aware of the potential risks involved in seemingly simple procedures.

For example, botulinum toxin is an exceptionally lethal neurotoxin which can kill an average adult male in concentrations as low as 90 nanograms. To put this in perspective, four kilos of the toxin could kill every human alive today. However, people have no qualms about having solutions of Botox, botulinum toxin’s more consumer friendly name, injected into their faces during their lunch hour. In fact, Botox procedures are seen to be so minor that they are not even counted among the 100,000 annual cosmetic surgery procedures. Yes, it is true that deaths from Botox are uncommon, but the idea that most people being treated with it have no idea how deadly it can actually be is a serious information gap.

But the problem doesn’t only lie with Botox.

Even the simplest of procedures, such as nose jobs can lead to serious disfigurement or deadly complications such as infection, clotting, and internal haemorrhaging. These risks are often not made completely aware to the consumer. Surgeons are forced to condense highly complex and technical information into a format which can be easily understood by laymen, in some instances leaving out important details. For example, there are several well known ways in which a rhinoplasty (nose job) can be performed, the nostrils can be cut, stretched, or the bones chipped away at. The most modern procedures with the lowest risk of complications are the ones involving stretching, but consumers are often left unaware as to which procedure is most likely to have the best results in their particular case, leaving them incapable of making a complete cost / benefit analysis.

Another serious problem with the cosmetic surgery market is the way in which procedures are advertised. As opposed to the market for health care, where there is no shortage of willing consumers, the cosmetic surgery market is depending more and more on good advertising to increase demand. The result is that people are not made fully aware of risks and people who previously were happy without plastic surgery are coerced into opting into potentially dangerous procedures. There are also numerous examples of clinics offering loyalty programs with deals such as ‘buy four operations and get one half price’ which encourage consumers to purchase dangerous procedures they have no need for ‘because they’re cheap.’

Asymmetric information is also present in the market in a similar way to the manner in which it is present in the used car market. While some clinics offer excellent service from highly trained professionals, others employ less skilled surgeons who have had little experience performing the procedures they endeavor to sell. Although it is easier to get third party evaluation reports on most clinics, asymmetrical information is still a problem for low income consumers who hope to have their operations at recently established, less expensive clinics.

The solutions to these information gaps are fairly simple. The ‘Action against Medical Accidents’ group is considering setting up a group to provide more information on surgeon success rates in an attempt to even out the asymmetrical information problem. The ‘Care Quality Commission’ is currently in charge of regulating independent surgical clinics in England, and all new clinics must now be licensed with the CQC. Clinics which sell low quality procedures may be fined or prosecuted by the CQC. On a more controversial note, a ban, or at least strict regulation on cosmetic surgery advertisement would help fill in information gaps, although it could well have a dire effect on the demand for cosmetic surgery.

The information gaps in the cosmetic surgery market are significant, but action is being taken by independent and government agencies to better educate the public on the risks and rewards of going under the knife.