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System Size, Lock-in and Network Effects for Patient Records

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Abstract

We examine empirically whether the size of a firm using a network affects the scope of its network usage, and consequently network effects and lock-in within the network. We use the example of hospital information exchange. We find that hospitals in larger hospital systems are more likely to exchange electronic patient information only within their system and less likely to exchange patient information externally. We show that hospitals are also more likely to exchange information externally if others hospitals also do so. This implies that the disinclination of large hospital systems to exchange data externally harms overall levels of network use. Our results highlight that makers of technology policy designed to encourage the optimal use of networks should consider regulating the behavior of network users as well as technology vendors.

Suggested Citation

  • Catherine Tucker & Amalia Miller, 2009. "System Size, Lock-in and Network Effects for Patient Records," Working Papers 09-07, NET Institute, revised Sep 2009.
  • Handle: RePEc:net:wpaper:0907
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    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    2. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    3. Burgess, James Jr. & Carey, Kathleen & Young, Gary J., 2005. "The effect of network arrangements on hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 24(2), pages 391-405, March.
    4. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009. "Avoiding market dominance: product compatibility in markets with network effects," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 455-485.
    5. Gautam Gowrisankaran & Joanna Stavins, 2004. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 260-276, Summer.
    6. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
    7. Timothy S. Simcoe & Stuart J.H. Graham & Maryann Feldman, 2007. "Competing on Standards? Entrepreneurship, Intellectual Property and the Platform Paradox," NBER Working Papers 13632, National Bureau of Economic Research, Inc.
    8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    9. Melnick, Glenn & Keeler, Emmett, 2007. "The effects of multi-hospital systems on hospital prices," Journal of Health Economics, Elsevier, vol. 26(2), pages 400-413, March.
    10. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001, March.
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    12. Amalia R. Miller & Catherine Tucker, 2009. "Privacy Protection and Technology Diffusion: The Case of Electronic Medical Records," Management Science, INFORMS, vol. 55(7), pages 1077-1093, July.
    13. Catherine Tucker, 2008. "Identifying Formal and Informal Influence in Technology Adoption with Network Externalities," Management Science, INFORMS, vol. 54(12), pages 2024-2038, December.
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    More about this item

    Keywords

    Technology Diffusion; Health-care IT; Network Externalities; Hospitals;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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