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Spatial Interaction, Spatial Multipliers, and Hospital Competition

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  • Mobley, Lee R
  • Frech, Ted E
  • Anselin, Luc

Abstract

The hospital competition literature demonstrates that estimates of the effect of local market structure on competition are sensitive to geographic market definition. Our spatial lag approach effects smoothing of the explanatory variables across the discrete market boundaries. This approach results in robust estimates of the impact of market structure on hospital pricing, which can be used to estimate the full effect of changes in prices inclusive of spillovers that cascade through the neighboring hospital markets. In markets where concentration is relatively high before a proposed merger, we demonstrate that OLS estimates can lead to the wrong antitrust policy conclusion while the more conservative lag estimates do not.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt4m8862hd.

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Date of creation: 01 Jun 2008
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Handle: RePEc:cdl:ucsbec:qt4m8862hd

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Keywords: spatial econometrics; spatial lag model; spatial multiplier; spatial spillovers; hospital antitrust; hospital competition; strategic pricing; Nash bargaining;

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  1. 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.
  2. Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, Elsevier, vol. 44(3), pages 438-467, November.
  3. Martin Gaynor & Robert J Town, 2012. "Competition in Health Care Markets," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 12/282, Department of Economics, University of Bristol, UK.
  4. Martin Gaynor & William B. Vogt, . "Antitrust and Competition in Health Care Markets," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 1999-E29, Carnegie Mellon University, Tepper School of Business.
  5. Saavedra, Luz Amparo, 2000. "A Model of Welfare Competition with Evidence from AFDC," Journal of Urban Economics, Elsevier, Elsevier, vol. 47(2), pages 248-279, March.
  6. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 22(3), pages 491-508, September.
  7. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, Elsevier, vol. 52(3), pages 285-307, October.
  8. Won Kim, Chong & Phipps, Tim T. & Anselin, Luc, 2003. "Measuring the benefits of air quality improvement: a spatial hedonic approach," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 45(1), pages 24-39, January.
  9. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, Elsevier, vol. 10(1-2), pages 87-92.
  10. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, Elsevier, vol. 10(1-2), pages 93-99.
  11. Dranove, David & Shanley, Mark, 1990. "A note on the relational aspects of hospital market definitions," Journal of Health Economics, Elsevier, Elsevier, vol. 8(4), pages 473-478, February.
  12. Brueckner, Jan K. & Saavedra, Luz A., 2001. "Do Local Governments Engage in Strategic Property-Tax Competition?," National Tax Journal, National Tax Association, National Tax Association, vol. 54(n. 2), pages 203-30, June.
  13. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 23(2), pages 247-262, Summer.
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Cited by:
  1. Mark Burkey, 2012. "Decomposing geographic accessibility into component parts: methods and an application to hospitals," The Annals of Regional Science, Springer, Springer, vol. 48(3), pages 783-800, June.
  2. Sánchez Navarro, Dennis, 2012. "Una propuesta metodológica para la definición de mercados geográficos relevantes
    [A proposed methodology for defining relevant geographic markets]
    ," MPRA Paper 44498, University Library of Munich, Germany.
  3. Hugh Gravelle & Rita Santos & Luigi Siciliani & Rosalind Goudie, 2012. "Hospital Quality Competition Under Fixed Prices," Working Papers, Centre for Health Economics, University of York 080cherp, Centre for Health Economics, University of York.
  4. Hugh Gravelle & Rita Santos & Luigi Siciliani, 2013. "Does a hospitals quality depend on the quality of other hospitals? A spatial econometrics approach to investigating hospital quality competition," Working Papers, Centre for Health Economics, University of York 082cherp, Centre for Health Economics, University of York.
  5. Dieter Pennerstorfer, 2014. "Price and Quality Competition in Spatial Markets. The Case of Camping Sites," WIFO Working Papers, WIFO 466, WIFO.
  6. Iwata, Shinichiro & Sumita, Kazuto & Fujisawa, Mieko, 2012. "Price competition in the spatial real estate market: Allies or rivals?," MPRA Paper 37438, University Library of Munich, Germany.

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