Hospital Mergers: A Spatial Competition Approach

Kurt Brekke (), Luigi Siciliani and Odd Rune Straume

No 8/2013, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: Using a spatial competition framework with three ex ante identical hospitals, we study the effects of a hospital merger on quality, price and welfare. The merging hospitals always reduce quality, but the non-merging hospital responds by reducing quality if prices are fixed and increasing quality if not. The merging hospitals increase prices if demand responsiveness to quality is sufficiently low, whereas the non-merging hospital always increases its price. If prices are endogenous, a merger leads to higher average prices and quality in the market. A merger is harmful for total patient utility but can improve social welfare under price competition.

Keywords: Hospital mergers; Spatial Competition; Antitrust. (search for similar items in EconPapers)
JEL-codes: I11 I18 L13 L44 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2013-04-04
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Working Paper: Hospital Mergers: A Spatial Competition Approach (2013)
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