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Hospital Mergers with Regulated Prices

Author

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  • Kurt R. Brekke
  • Luigi Siciliani
  • Odd Rune Straume

Abstract

We study the effects of a hospital merger in a spatial competition framework where semi‐altruistic hospitals choose quality and cost‐containment effort. Whereas a merger always leads to higher average cost efficiency, the effect on quality provision depends on the strategic nature of quality competition, which in turn depends on the degree of altruism and the effectiveness of cost‐containment effort. If qualities are strategic complements, then a merger leads to lower quality for all hospitals. If qualities are strategic substitutes, then a merger leads to higher quality for at least one hospital, and might also yield higher average quality provision and increased patient utility.

Suggested Citation

  • Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Hospital Mergers with Regulated Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(3), pages 597-627, July.
    • Handle: RePEc:bla:scandj:v:119:y:2017:i:3:p:597-627
    DOI: 10.1111/sjoe.12191
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    Cited by:

    1. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    2. Cirulli, Vanessa & Marini, Giorgia & Marini, Marco A. & Straume, Odd Rune, 2025. "Do hospital mergers reduce waiting times? Theory and evidence from the English NHS," Journal of Economic Behavior & Organization, Elsevier, vol. 238(C).
    3. Houyuan Jiang & Zhan Pang & Sergei Savin, 2020. "Performance Incentives and Competition in Health Care Markets," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1145-1164, May.
    4. Guccio, C. & Lisi, D. & Martorana, M.F. & Pignataro, G., 2020. "Incorporating quality in the efficiency assessment of hospitals using a generalized directional distance function approach," Health, Econometrics and Data Group (HEDG) Working Papers 20/17, HEDG, c/o Department of Economics, University of York.
    5. Johann Han & Nadja Kairies‐Schwarz & Markus Vomhof, 2017. "Quality competition and hospital mergers—An experiment," Health Economics, John Wiley & Sons, Ltd., vol. 26(S3), pages 36-51, December.
    6. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2024. "Competition, quality and integrated health care," Journal of Health Economics, Elsevier, vol. 95(C).
    7. Laura Levaggi & Rosella Levaggi, 2024. "Spatial Competition Models in Health Care Markets: A Review," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 65(3), pages 721-743, November.
    8. Johann Han & Nadja Kairies-Schwarz & Markus Vomhof, 2024. "Strategic behaviour and decision making in competitive hospital markets: an experimental investigation," International Journal of Health Economics and Management, Springer, vol. 24(3), pages 333-355, September.
    9. Han, Johann & Kairies-Schwarz, Nadja & Vomhof, Markus, 2020. "Quality provision in competitive health care markets: Individuals vs. teams," Ruhr Economic Papers 839, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Bisceglia, Michele & Padilla, Jorge & Piccolo, Salvatore & Sääskilahti, Pekka, 2023. "On the bright side of market concentration in a mixed-oligopoly healthcare industry," Journal of Health Economics, Elsevier, vol. 90(C).
    11. Francesco Longo & Luigi Siciliani & Hugh Gravelle & Rita Santos, 2017. "Do hospitals respond to rivals' quality and efficiency? A spatial panel econometric analysis," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 38-62, September.
    12. Guccio, Calogero & Lisi, Domenico & Martorana, Marco Ferdinando & Pignataro, Giacomo, 2024. "Is local competition effective in improving quality and efficiency of hospitals? Insights from an asymmetric spatial competition model," Research in Economics, Elsevier, vol. 78(3).
    13. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Horizontal mergers and product quality," Canadian Journal of Economics, Canadian Economics Association, vol. 50(4), pages 1063-1103, November.
    14. Rachet-Jacquet, Laurie & Gutacker, Nils & Siciliani, Luigi, 2021. "Scale economies in the health sector: The effect of hospital volume on health gains from hip replacement surgery," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 704-729.
    15. Laurie Rachet-Jacquet & Nils Gutacker & Luigi Siciliani, 2019. "The causal effect of hospital volume on health gains from hip replacement surgery," Working Papers 168cherp, Centre for Health Economics, University of York.
    16. Daniel Herrera-Araujo & Lise Rochaix, 2020. "Competition between Public and Private Maternity Care Providers in France: Evidence on Market Segmentation," IJERPH, MDPI, vol. 17(21), pages 1-19, October.
    17. Mak, Henry Y., 2018. "Managing imperfect competition by pay for performance and reference pricing," Journal of Health Economics, Elsevier, vol. 57(C), pages 131-146.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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