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Group Purchasing Organizations, Monopsony, and Antitrust Policy

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  • Roger D. Blair
  • Christine Piette Durrance

Abstract

Group purchasing organizations (GPOs) consolidate the purchasing power of their members and negotiate contracts with input suppliers on their behalf. GPOs have received attention from the Department of Justice and Federal Trade Commission because of concerns over monopsony power and standardization of hospital production costs. GPOs have been criticized in the literature for their contracting practices, which may appear to be exclusionary, and their funding mechanism, which may lead to incentive incompatibility. We analyze these competitive concerns in turn. We find GPOs to be procompetitive and suggest an antitrust policy that preserves the benefits of GPO operations while protecting consumers from any competitive shortcomings. Copyright © 2013 John Wiley & Sons, Ltd.

Suggested Citation

  • Roger D. Blair & Christine Piette Durrance, 2014. "Group Purchasing Organizations, Monopsony, and Antitrust Policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(7), pages 433-443, October.
    • Handle: RePEc:wly:mgtdec:v:35:y:2014:i:7:p:433-443
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    Cited by:

    1. Frank Bodendorf & Manuel Lutz & Jörg Franke, 2021. "Valuation and pricing of software licenses to support supplier–buyer negotiations: A case study in the automotive industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1686-1702, October.
    2. Jozsef Sakovics & Lluis Bru & Daniel Cardona, 2018. "Block sourcing," Edinburgh School of Economics Discussion Paper Series 287, Edinburgh School of Economics, University of Edinburgh.
    3. Grzegorz Zimon & Robert Dankiewicz, 2020. "Trade Credit Management Strategies in SMEs and the COVID-19 Pandemic—A Case of Poland," Sustainability, MDPI, vol. 12(15), pages 1-16, July.
    4. Grzegorz Zimon & Dominik Zimon, 2020. "Quality Management Systems and Working Capital SMEs in GPO—A Case of Poland," Administrative Sciences, MDPI, vol. 10(4), pages 1-13, October.
    5. Grzegorz Zimon & Marek Sobolewski & Grzegorz Lew, 2020. "An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland," Energies, MDPI, vol. 13(11), pages 1-17, June.
    6. Younes, Amin & Fingerman, Kevin R. & Barrientos, Cassidy & Carman, Jerome & Johnson, Karly & Wallach, Eli S., 2022. "How the U.S. Renewable Fuel Standard could use garbage to pay for electric vehicles," Energy Policy, Elsevier, vol. 166(C).
    7. Grzegorz Zimon, 2019. "An Analysis of the Financial Situation of Central Units of Group Purchasing Organizations," International Review of Management and Marketing, Econjournals, vol. 9(3), pages 134-137.
    8. Hui Song & Hongkun Ma & Zimeng Ma, 2023. "Group‐buying with products of heterogeneous quality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2408-2423, June.
    9. Roger D. Blair & Christina DePasquale, 2020. "Monopsony and two‐part tariffs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 730-734, July.
    10. Lluis Bru & Daniel Cardona, 2016. "Strategic Sourcing in Procurement," DEA Working Papers 82, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    11. Grzegorz Zimon & Hossein Tarighi, 2021. "Effects of the COVID-19 Global Crisis on the Working Capital Management Policy: Evidence from Poland," JRFM, MDPI, vol. 14(4), pages 1-17, April.
    12. Bru, Lluís & Cardona, Daniel & Sákovics, József, 2023. "Block sourcing plus," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1130-1140.
    13. Zhou, Maosen & Dan, Bin & Ma, Songxuan & Zhang, Xumei, 2017. "Supply chain coordination with information sharing: The informational advantage of GPOs," European Journal of Operational Research, Elsevier, vol. 256(3), pages 785-802.

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