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Competition and market structure in the dental industry

Author

Listed:
  • Thanh An Nguyen Le

    (International University - Vietnam National Universities)

  • Anthony T. Lo Sasso

    (DePaul University)

Abstract

We use Survey of Dental Practice data from 1983 to 2012 to examine market power of dentists and hygienists in private practice. Our findings are consistent with a dental market wherein practices use hygienist services as a “loss leader” in order to steer patients into more lucrative dental services, which exhibit the ability to markup price above marginal cost. Both dental care exhibits an elasticity of demand of roughly − 0.2, while hygienist care exhibits and elasticity of demand of nearly − 0.6. Another theme that emerged from our findings is the evidence for significant economies of scale in the dental market. The overall returns to scale parameter of 2.1 suggests significant increasing returns to scale are available to the typical dental practice. Given that the typical practice has 1.5 dentists, the finding is not surprising. While returns to scale diminishes with visit volume, the largest quartile of practices still has meaningful increasing returns to scale of roughly 1.75.

Suggested Citation

  • Thanh An Nguyen Le & Anthony T. Lo Sasso, 2020. "Competition and market structure in the dental industry," International Journal of Health Economics and Management, Springer, vol. 20(2), pages 201-214, June.
  • Handle: RePEc:kap:ijhcfe:v:20:y:2020:i:2:d:10.1007_s10754-019-09277-8
    DOI: 10.1007/s10754-019-09277-8
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 13th July 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-07-13 11:00:06

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    More about this item

    Keywords

    Dentists; Cost function; Competition;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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