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Prices and Quantities in Health Care Antitrust Damages

  • Martha A. Starr
  • R. Forrest McCluer

Antitrust analysis conventionally assumes that illegal agreements among competitors raise prices and lower quantities, relative to lawful competition. However, markets for healthcare services have tendencies towards overprovision, which may increase when competition declines. This paper examines this possibility using data from a well-known antitrust case in Wisconsin. We find that, in parts of the state where physician groups illegally divided up markets, costs of physician services rose by about 10% more than they did elsewhere, with about half of this increase due to increased services. This suggests that higher quantities can contribute to healthcare antitrust damages, along with higher prices.

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File URL: http://www.american.edu/cas/economics/research/upload/2014-03.pdf
File Function: First version, 2014
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Paper provided by American University, Department of Economics in its series Working Papers with number 2014-03.

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Date of creation: 2014
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Handle: RePEc:amu:wpaper:2014-03
Contact details of provider: Web page: http://www.american.edu/cas/economics/

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  2. Laurence C. Baker, 1994. "Does Competition from HMOs Affect Fee-For-Service Physicians?," NBER Working Papers 4920, National Bureau of Economic Research, Inc.
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  7. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-63, Winter.
  8. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-61, October.
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  12. Ana Aizcorbe & Nicole Nestoriak, 2010. "Changing Mix of Medical Care Services: Stylized Facts and Implications for Price Indexes," BEA Working Papers 0064, Bureau of Economic Analysis.
  13. John Schneider & Pengxiang Li & Donald Klepser & N. Peterson & Timothy Brown & Richard Scheffler, 2008. "The effect of physician and health plan market concentration on prices in commercial health insurance markets," International Journal of Health Care Finance and Economics, Springer, vol. 8(1), pages 13-26, March.
  14. Daniel L. Rubinfeld, 2010. "Econometric Issues in Antitrust Analysis," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(1), pages 62-77, March.
  15. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 1-19.
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