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Countervailing Market Power and Hospital Competition

Author

Listed:
  • Eric Barrette

    (Medtronic)

  • Gautam Gowrisankaran

    (Columbia University, CEPR, and NBER)

  • Robert Town

    (University of Texas and NBER)

Abstract

While economic theories indicate that market power by downstream firms can potentially counteract market power upstream, antitrust policy is opaque as to whether to incorporate countervailing market power in merger analyses. We use detailed national claims data from the health care sector to evaluate whether countervailing insurer power does indeed limit hospitals' exercise of market power. We estimate willingness-to-pay models to evaluate hospital market power across analysis areas. We find that countervailing market power is important: a typical hospital merger would raise hospital prices 4.3% at the 25th percentile of insurer concentration but only 0.97% at the 75th percentile of insurer concentration.

Suggested Citation

  • Eric Barrette & Gautam Gowrisankaran & Robert Town, 2022. "Countervailing Market Power and Hospital Competition," The Review of Economics and Statistics, MIT Press, vol. 104(6), pages 1351-1360, November.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:6:p:1351-1360
    DOI: 10.1162/rest_a_01020
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    Cited by:

    1. Abigail Ferguson & Nellie Lew & Michael Lipsitz & Devesh Raval, 2023. "Economics at the FTC: Spatial Demand, Veterinary Hospital Mergers, Rulemaking, and Noncompete Agreements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(4), pages 435-465, December.

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