Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining

Matthew Grennan and Ashley Swanson

No 22039, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a detailed dataset of hospitals' purchase orders, we find that information on purchasing by peer hospitals leads to reductions in the prices hospitals negotiate for supplies. Identification is based on staggered access to information across hospitals over time. Within coronary stents, reductions are concentrated among hospitals previously paying relatively high prices and for brands purchased in large volumes, and are consistent with resolving asymmetric information problems. Estimates across a large number of other important product categories indicate that the effects of information are largest in both absolute and relative terms for physician preference items (PPIs). Among PPIs, high-price, high-quantity hospital-brand combinations average 3.9 percent savings, versus 1.6 percent for commodities.

JEL-codes: D40 D82 D83 I11 L14 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-com and nep-hea
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Citations: View citations in EconPapers (4)

Published as Matthew Grennan & Ashley Swanson, 2020. "Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining," Journal of Political Economy, vol 128(4), pages 1234-1268.

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