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The Response to Market Power: Non-Profit Hospitals versus For-Profit Hospitals

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  • Peter Zaleski

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  • Alfredo Esposto

Abstract

In the debate over whether non-profit and for-profit hospitals behave differently in the presence of market concentration and greater individual market power, most scholars have concentrated on the traditional price analysis approach. But this has produced conflicting results. This study attempts to avoid the limitations of price as an indicator of how these hospitals respond to greater market power by examining changes in admissions given the capacity decision. The results indicate that for-profit and public hospitals respond similarly to increased market power. On the other hand, private non-profit hospitals appear to act differently. This presents important implications for antitrust policies and for the management of non-profit hospitals. Copyright International Atlantic Economic Society 2007

Suggested Citation

  • Peter Zaleski & Alfredo Esposto, 2007. "The Response to Market Power: Non-Profit Hospitals versus For-Profit Hospitals," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(3), pages 315-325, September.
  • Handle: RePEc:kap:atlecj:v:35:y:2007:i:3:p:315-325 DOI: 10.1007/s11293-007-9072-z
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    References listed on IDEAS

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    1. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July.
    2. Noether, Monica, 1988. "Competition among hospitals," Journal of Health Economics, Elsevier, vol. 7(3), pages 259-284, September.
    3. Hoerger, Thomas J., 1991. "'Profit' variability in for-profit and not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 10(3), pages 259-289, October.
    4. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October.
    5. Gaynor, Martin & Vogt, William B, 2003. " Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, pages 764-785.
    6. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
    7. 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 and Economics, University of Chicago Press, vol. 36(1), pages 179-204, April.
    8. Becker, Edmund R & Sloan, Frank A, 1985. "Hospital Ownership and Performance," Economic Inquiry, Western Economic Association International, vol. 23(1), pages 21-36, January.
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    More about this item

    Keywords

    Non-Profits; Hospitals; Capacity; D21;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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