IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v34y2003i4p764-85.html
   My bibliography  Save this article

Competition among Hospitals

Author

Listed:
  • Gaynor, Martin
  • Vogt, William B

Abstract

We examine competition in the hospital industry, in particular the effect of ownership type (for-profit, not-for-profit, government). We estimate a structural model of demand and pricing in the hospital industry in California, then use the estimates to simulate the effect of a merger. California hospitals in 1995 face an average price elasticity of demand of -4.85. Not-for-profit hospitals face less elastic demand and act as if they have lower marginal costs. Their prices are lower than those of for-profits, but markups are higher. We simulate the effects of the 1997 merger of two hospital chains. In San Luis Obispo County, where the merger creates a near monopoly, prices rise by up to 53%, and the predicted price increase would not be substantially smaller were the chains not-for-profit. Copyright 2003 by the RAND Corporation.

Suggested Citation

  • Gaynor, Martin & Vogt, William B, 2003. "Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 764-785, Winter.
    • Handle: RePEc:rje:randje:v:34:y:2003:i:4:p:764-85
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487, Elsevier.
    2. David Simpson, 2000. "Economics and Business," Palgrave Macmillan Books, in: Rethinking Economic Behaviour, chapter 5, pages 59-68, Palgrave Macmillan.
    3. Michael G. Vita & Seth Sacher, 2001. "The Competitive Effects of Not‐for‐Profit Hospital Mergers: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 63-84, March.
    4. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 18(1), pages 69-86, January.
    5. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-277, June.
    6. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
    7. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
    8. Gregory Werden & Luke Froeb & Timothy Tardiff, 1996. "The Use of the Logit Model in Applied Industrial Organization," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 83-105.
    9. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    10. Darius Lakdawalla & Tomas Philipson, 1998. "Nonprofit Production and Competition," NBER Working Papers 6377, National Bureau of Economic Research, Inc.
    11. Nevo, Aviv, 1997. "Mergers with Differentiated Products: The Case of Ready-to-Eat Cereal," Competition Policy Center, Working Paper Series qt1d53t6ts, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    12. Lynk, William J. & Neumann, Lynette R., 1999. "Price and profit," Journal of Health Economics, Elsevier, vol. 18(1), pages 99-116, January.
    13. Newhouse, Joseph P, 1970. "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, American Economic Association, vol. 60(1), pages 64-74, March.
    14. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
    15. Luke Froeb & Gregory Werden, 2000. "An Introduction to the Symposium on the Use of Simulation in Applied Industrial Organization," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 133-137.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    2. R. Halbersma & M. Mikkers & E. Motchenkova & I. Seinen, 2011. "Market structure and hospital–insurer bargaining in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(6), pages 589-603, December.
    3. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    4. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    5. Jean Marie Abraham & Martin Gaynor & William B. Vogt, 2007. "Entry And Competition In Local Hospital Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 265-288, June.
    6. Baltagi, Badi H. & Yen, Yin-Fang, 2014. "Hospital treatment rates and spillover effects: Does ownership matter?," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 193-202.
    7. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    8. Chou, Shin-Yi, 2002. "Asymmetric information, ownership and quality of care: an empirical analysis of nursing homes," Journal of Health Economics, Elsevier, vol. 21(2), pages 293-311, March.
    9. Oliver Budzinski & Isabel Ruhmer, 2010. "Merger Simulation In Competition Policy: A Survey," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 277-319.
    10. Cory S. Capps & Dennis W. Carlton & Guy David, 2020. "Antitrust Treatment Of Nonprofits: Should Hospitals Receive Special Care?," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1183-1199, July.
    11. Wagstaff, Adam & Culyer, Anthony J., 2012. "Four decades of health economics through a bibliometric lens," Journal of Health Economics, Elsevier, vol. 31(2), pages 406-439.
    12. Katz Michael L, 2011. "Insurance, Consumer Choice, and the Equilibrium Price and Quality of Hospital Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-44, January.
    13. Nolan Miller & Karen Eggleston & Richard Zeckhauser, 2006. "Provider choice of quality and surplus," International Journal of Health Economics and Management, Springer, vol. 6(2), pages 103-117, June.
    14. Peter Davis & Pasquale Schiraldi, 2014. "The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 32-63, March.
    15. Michele Fioretti, 2022. "Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (former title: Social Responsibility and Firm's Objectives)," SciencePo Working papers hal-03393065, HAL.
    16. Affeldt, P. & Argentesi, E. & Filistrucchi, Lapo, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Other publications TiSEM 1317bf39-d02e-4f61-a34f-e, Tilburg University, School of Economics and Management.
    17. Anna-Lena Trescher & Stefan Listl & Onno Galien & Frank Gabel & Olivier Kalmus, 2020. "Once bitten, twice shy? Lessons learned from an experiment to liberalize price regulations for dental care," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(3), pages 425-436, April.
    18. Lien, Hsien-Ming & Chou, Shin-Yi & Liu, Jin-Tan, 2008. "Hospital ownership and performance: Evidence from stroke and cardiac treatment in Taiwan," Journal of Health Economics, Elsevier, vol. 27(5), pages 1208-1223, September.
    19. Victor Aguirregabiria & Margaret Slade, 2017. "Empirical models of firms and industries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1445-1488, December.
    20. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:34:y:2003:i:4:p:764-85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.