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Market structure and technology: evidence from the Italian National Health Service

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  • Silvana Robone
  • Alberto Zanardi

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Abstract

Sutton (1991, Sunk costs and market structure. Cambridge: MIT Press; 1998, Technology and market structure. Cambridge: MIT Press) theorised that industries evolve into distinct market configurations in terms of concentration, depending upon product homogeneity and whether R&D or advertising are relevant relative to set-up costs. This paper tests the existence of such a relationship between technological profiles and market structure empirically, using the health care services provided by the Italian National Health Service as the specific economic framework. Our results support the empirical predictions made by Sutton. In particular, in markets where the technological intensity is low the lower bound to concentration converges monotonically to zero when the market size increases, for any level of product homogeneity. Conversely, in markets where the technological intensity is high the lower bound of concentration converges to some positive (non-zero) value when market size increases, while the lower bound increases (from zero) when the level of product homogeneity increases. Copyright Springer Science+Business Media, LLC 2006

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Bibliographic Info

Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

Volume (Year): 6 (2006)
Issue (Month): 3 (September)
Pages: 215-236

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Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:3:p:215-236

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Web page: http://www.springerlink.com/link.asp?id=106603

Related research

Keywords: Health care; Market structure; Technology; I11; L1; L8; O33;

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References

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  1. Eulália Dalmau-Atarrodona & Jaume Puig-Junoy, 1998. "Market Structure and Hospital Efficiency: Evaluating Potential Effects of Deregulation in a National Health Service," Review of Industrial Organization, Springer, vol. 13(4), pages 447-466, August.
  2. Rosella Levaggi & Roberto Zanola, 2004. "Patients' migration across regions: the case of Italy," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1751-1757.
  3. Luigi Buzzacchi & Tommaso Valetti, 1999. "Firm Size Distribution: Testing the "Independent Submarkets Model" in the Italian Motor Insurance Industry," STICERD - Economics of Industry Papers 24, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. R. Cellini & G. Pignataro & I. Rizzo, 1999. "Competition and Efficiencyin health care: an analysis of the Italian case," Working Papers 354, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Giorgetti Maria Letizia, 2000. "La verifica empirica del modello di Sutton per i settori manufatturieri italiani," L'industria, Società editrice il Mulino, issue 3, pages 543-564.
  6. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  7. Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-94, June.
  8. Cory S. Capps & David Dranove & Shane Greenstein & Mark Satterthwaite, 2001. "The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers," NBER Working Papers 8216, National Bureau of Economic Research, Inc.
  9. Warell, Linda, 2005. "Defining geographic coal markets using price data and shipments data," Energy Policy, Elsevier, vol. 33(17), pages 2216-2230, November.
  10. Blank, Jos L. T. & Vogelaar, Iris, 2004. "Specifying technical change: a research on the nature of technical change in Dutch hospital industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 448-463, July.
  11. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-46, December.
  12. Marín Uribe, Pedro Luis & Siotis, Georges, 2002. "Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry," CEPR Discussion Papers 3162, C.E.P.R. Discussion Papers.
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Cited by:
  1. Mascia, Daniele & Di Vincenzo, Fausto & Cicchetti, Americo, 2012. "Dynamic analysis of interhospital collaboration and competition: Empirical evidence from an Italian regional health system," Health Policy, Elsevier, vol. 105(2), pages 273-281.
  2. Hessami, Zohal, 2010. "Corruption and the Composition of Public Expenditures: Evidence from OECD Countries," MPRA Paper 25945, University Library of Munich, Germany.
  3. Zohal Hessami, 2013. "Corruption, Public Procurement, and the Budget Composition: Theory and Evidence from OECD Countries," Working Paper Series of the Department of Economics, University of Konstanz 2013-27, Department of Economics, University of Konstanz.
  4. Eila Kankaanpää & Ismo Linnosmaa & Hannu Valtonen, 2011. "Public health care providers and market competition: the case of Finnish occupational health services," The European Journal of Health Economics, Springer, vol. 12(1), pages 3-16, February.

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