Countervailing Market Power and Hospital Competition

Eric Barrette, Gautam Gowrisankaran and Robert Town

No 27005, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While economic theories indicate that market power by downstream firms can potentially counteract market power upstream, antitrust policy is opaque about whether to incorporate countervailing market power in merger analyses. We use detailed national claims data from the healthcare 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.

JEL-codes: I11 I18 L11 L13 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-com, nep-hea and nep-ind
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Published as Eric Barrette & Gautam Gowrisankaran & Robert Town, 2022. "Countervailing Market Power and Hospital Competition," The Review of Economics and Statistics, vol 104(6), pages 1351-1360.

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