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Entry Deterrence in Hospital Procedure Markets: A Simple Model of Learning-By-Doing

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  • Leemore S. Dafny

Abstract

This paper examines the strategic behavior of hospitals in one of their primary output markets: inpatient surgical procedures. High levels of learning-by-doing in surgical fields may act as a barrier to entry. I investigate whether incumbent hospitals facing prospective entry in a procedure market manipulate their procedure volumes to produce such a barrier. I derive straightforward empirical tests from a model of patient demand, procedure quality, and differentiated product competition. Using hospital data on electrophysiological studies, an invasive cardiac procedure, I find evidence of entry-deterring investment in procedure volume. These findings suggest that competitive motivations may play a role in treatment decisions.

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  • Leemore S. Dafny, 2003. "Entry Deterrence in Hospital Procedure Markets: A Simple Model of Learning-By-Doing," NBER Working Papers 9871, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9871
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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • I2 - Health, Education, and Welfare - - Education

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