Entry Deterrence in Hospital Procedure Markets: A Simple Model of Learning-By-Doing
AbstractThis paper examines the strategic behavior of hospitals in one of their primary output markets: inpatient surgical procedures. High levels of learning-by-doing in surgical fields may act as a barrier to entry. I investigate whether incumbent hospitals facing prospective entry in a procedure market manipulate their procedure volumes to produce such a barrier. I derive straightforward empirical tests from a model of patient demand, procedure quality, and differentiated product competition. Using hospital data on electrophysiological studies, an invasive cardiac procedure, I find evidence of entry-deterring investment in procedure volume. These findings suggest that competitive motivations may play a role in treatment decisions.
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Date of creation: Jul 2003
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Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- I2 - Health, Education, and Welfare - - Education
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-07-29 (All new papers)
- NEP-EDU-2003-07-29 (Education)
- NEP-ENT-2003-08-17 (Entrepreneurship)
- NEP-HEA-2003-07-29 (Health Economics)
- NEP-IND-2003-08-17 (Industrial Organization)
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