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Market structure and technology: evidence from the Italian National Health Service

  • Silvana Robone
  • Alberto Zanardi

    ()

Sutton (1991, Sunk costs and market structure. Cambridge: MIT Press; 1998, Technology and market structure. Cambridge: MIT Press) theorised that industries evolve into distinct market configurations in terms of concentration, depending upon product homogeneity and whether R&D or advertising are relevant relative to set-up costs. This paper tests the existence of such a relationship between technological profiles and market structure empirically, using the health care services provided by the Italian National Health Service as the specific economic framework. Our results support the empirical predictions made by Sutton. In particular, in markets where the technological intensity is low the lower bound to concentration converges monotonically to zero when the market size increases, for any level of product homogeneity. Conversely, in markets where the technological intensity is high the lower bound of concentration converges to some positive (non-zero) value when market size increases, while the lower bound increases (from zero) when the level of product homogeneity increases. Copyright Springer Science+Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s10754-006-9002-7
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Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

Volume (Year): 6 (2006)
Issue (Month): 3 (September)
Pages: 215-236

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Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:3:p:215-236
DOI: 10.1007/s10754-006-9002-7
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/public+health/journal/10754/PS2

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  1. Eulália Dalmau-Atarrodona & Jaume Puig-Junoy, 1998. "Market Structure and Hospital Efficiency: Evaluating Potential Effects of Deregulation in a National Health Service," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(4), pages 447-466, August.
  2. Giorgetti Maria Letizia, 2000. "La verifica empirica del modello di Sutton per i settori manufatturieri italiani," L'industria, Società editrice il Mulino, issue 3, pages 543-564.
  3. Buzzacchi, Luigi & Valletti, Tommaso, 2002. "Firm Size Distribution: Testing the 'Independent Submarkets Model' in the Italian Motor Insurance Industry," CEPR Discussion Papers 3444, C.E.P.R. Discussion Papers.
  4. Blank, Jos L. T. & Vogelaar, Iris, 2004. "Specifying technical change: a research on the nature of technical change in Dutch hospital industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 448-463, July.
  5. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-46, December.
  6. 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.
  7. Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-94, June.
  8. Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
  9. Marín Uribe, Pedro Luis & Siotis, Georges, 2002. "Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry," CEPR Discussion Papers 3162, C.E.P.R. Discussion Papers.
  10. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
  11. R. Cellini & G. Pignataro & I. Rizzo, 1999. "Competition and Efficiency in health care: an analysis of the Italian case," Working Papers 354, Dipartimento Scienze Economiche, Universita' di Bologna.
  12. Warell, Linda, 2005. "Defining geographic coal markets using price data and shipments data," Energy Policy, Elsevier, vol. 33(17), pages 2216-2230, November.
  13. Rosella Levaggi & Roberto Zanola, 2004. "Patients' migration across regions: the case of Italy," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1751-1757.
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