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Competition and market power in physician private practices

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  • Timothy Gunning
  • Robin Sickles

Abstract

This article presents a theoretical and empirical model to examine competition in physician private practices implementing a conjectural variation framework. Our study uses the 1998 American Medical Association Physician Socioeconomic Monitoring Survey and tests for collusion and market power in physician private practices. The year 1998 is of particular interest due to charges filed in Federal court by The United States Department of Justice (DOJ) against a number of large physician practices, ruling that physicians could no longer engage in joint negotiations. The indictments by the DOJ were based on anecdotal economic and legal observations rather than the result of empirical evidence from accepted econometric modeling. Our model indicates that the behavior of physicians in medical subspecialties and surgical subspecialties is consistent with a non-cooperative Nash equilibrium. Copyright Springer-Verlag 2013

Suggested Citation

  • Timothy Gunning & Robin Sickles, 2013. "Competition and market power in physician private practices," Empirical Economics, Springer, vol. 44(2), pages 1005-1029, April.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:2:p:1005-1029
    DOI: 10.1007/s00181-011-0540-6
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    Cited by:

    1. Naomi Hausman & Kurt Lavetti, 2021. "Physician Practice Organization and Negotiated Prices: Evidence from State Law Changes," American Economic Journal: Applied Economics, American Economic Association, vol. 13(2), pages 258-296, April.
    2. Philippe CHONÉ & Elise COUDIN & Anne PLA, 2019. "Does the Provision of Physician Services Respond to Competition?," Working Papers 2019-20, Center for Research in Economics and Statistics.
    3. Hugh Gravelle & Anthony Scott & Peter Sivey & Jongsay Yong, 2016. "Competition, prices and quality in the market for physician consultations," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 135-169, March.
    4. Robert Germeshausen & Timo Panke & Heike Wetzel, 2020. "Firm characteristics and the ability to exercise market power: empirical evidence from the iron ore market," Empirical Economics, Springer, vol. 58(5), pages 2223-2247, May.
    5. 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.
    6. Thanh An Nguyen Le & Anthony T. Lo Sasso, 2020. "Competition and market structure in the dental industry," International Journal of Health Economics and Management, Springer, vol. 20(2), pages 201-214, June.
    7. Topolyan, Iryna & Brasington, David & Xu, Xu, 2019. "Assessing the degree of competitiveness in the market for outpatient hospital services," Journal of Economics and Business, Elsevier, vol. 105(C).
    8. Choné, P. & Coudin, É. & Pla, A., 2014. "Are physician fees responsive to competition?," Health, Econometrics and Data Group (HEDG) Working Papers 14/20, HEDG, c/o Department of Economics, University of York.

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    More about this item

    Keywords

    Physician; Multi-product cost function; Competition; Non-cooperative Nash equilibrium; C30; D24; I12; L13;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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