This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Entry and Competition in Local Hospital Markets

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jean Marie Abraham
Martin Gaynor
William B Vogt ()

Additional information is available for the following registered author(s):

Abstract

There has been considerable consolidation in the hospital industry in recent years. Over 900 deals occurred from 1994-2000, and many local markets, even in large urban areas, have been reduced to monopolies, duopolies or triopolies. This surge in consolidation has led to concern about its effect on competition in local markets for hospital services. In this paper we examine the impact of market structure on competition in local hospital markets – specifically, does competition increase with the number of firms? We extend the entry model developed by Bresnahan and Reiss to make use of quantity information and apply it to data on the US hospital industry. The results from the estimation are striking. In the hospital markets we examine, entry leads to markets quickly becoming competitive. Entry reduces variable profits and increases quality. Indeed, most of the effects of entry come from having a second and possibly a third firm enter the market. The use of quantity information allows us to infer that entry is welfare increasing.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp88.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 03/088.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 31 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:bri:cmpowp:03/088

Contact details of provider:
Postal: Mary Paley Building, 12 Priory Road, Bristol, BS8 1TN
Phone: 0117 954 6943
Fax: 0117 954 6997
Email:
Web page: http://www.bris.ac.uk/cmpo/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Karen Ireland).

Related research
Keywords: analysis of health care markets

Other versions of this item:

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krishnan, Ranjani, 2001. "Market restructuring and pricing in the hospital industry," Journal of Health Economics, Elsevier, vol. 20(2), pages 213-237, March. [Downloadable!] (restricted)
  2. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  4. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May. [Downloadable!] (restricted)
  5. Steven Berry & James Levinsohn & Ariel Pakes, 1998. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," NBER Working Papers 6481, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring. [Downloadable!] (restricted)
  7. Lynk, William J. & Neumann, Lynette R., 1999. "Price and profit," Journal of Health Economics, Elsevier, vol. 18(1), pages 99-116, January. [Downloadable!] (restricted)
  8. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January. [Downloadable!] (restricted)
  9. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June. [Downloadable!] (restricted)
  10. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law & Economics, University of Chicago Press, vol. 38(2), pages 437-61, October.
  11. Feldman, Roger & Dowd, Bryan, 1986. "Is there a competitive market for hospital services?," Journal of Health Economics, Elsevier, vol. 5(3), pages 277-292, September. [Downloadable!] (restricted)
  12. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management. [Downloadable!]
  13. Dranove, David & Shanley, Mark & White, William D, 1993. "Price and Concentration in Hospital Markets: The Switch from Patient-Driven to Payer-Driven Competition," Journal of Law & Economics, University of Chicago Press, vol. 36(1), pages 179-204, April.
  14. Dranove, David & White, William D, 1994. "Recent Theory and Evidence on Competition in Hospital Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 3(1), pages 169-209, Spring.
  15. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn. [Downloadable!] (restricted)
    Other versions:
  16. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer. [Downloadable!] (restricted)
  17. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
    Other versions:
  18. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July. [Downloadable!] (restricted)
  19. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 421-440, Autumn. [Downloadable!] (restricted)
  20. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, . "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the 2nd Best in Health Care Markets," GSIA Working Papers 1999-E30, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joëlle Noailly & Richard Nahuis, 2005. "Competition and quality in the notary profession," CPB Documents 94, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  2. Carol Propper & Deborah Wilson & Simon Burgess, 2005. "Extending Choice In English Health Care: The implications of the economic evidence," The Centre for Market and Public Organisation 05/133, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  3. Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Joëlle Noailly & Sabine Visser & Paul Grout, 2007. "The impact of market forces on the provision of childcare: Insights from the 2005 Childcare Act in the Netherlands," CPB Memoranda 176, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  5. Cleeren, K. & Dekimpe, M.G. & Verboven, F., 2005. "Intra- and Inter-Channel Competition in Local-Service Sectors," Research Paper ERS-2005-018-MKT Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
  6. Rexford E. Santerre & John A. Vernon, 2006. "The consumer welfare implications of the hospital ownership mix in the US: an exploratory study," Health Economics, John Wiley & Sons, Ltd., vol. 15(11), pages 1187-1199. [Downloadable!]
  7. Andrew M. Cohen & Beth A. Freeborn & Brian McManus, 2007. "Competition and Crowding-Out among Public, Non-Profit and For-Profit Organizations: Evidence from Outpatient Substance Abuse Treatment," Working Papers 52, Department of Economics, College of William and Mary. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by editing a NEP report.

This page was last updated on 2008-7-7.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.