Simulating Hospital Merger Simulations

David J. Balan and Keith Brand

Journal of Industrial Economics, 2023, vol. 71, issue 1, 47-123

Abstract: We perform a Monte Carlo experiment to assess the performance of three hospital merger simulation methods. Our analysis proceeds as follows: (i) specify a theoretical model of hospital markets and use it to generate “true” price effects for many simulated mergers; (ii) for each simulated merger, generate data of the kind commonly available in real‐world merger analysis and apply the simulation methods to those data; and (iii) compare the predictions of the simulation methods to the true price effects. All three simulation methods perform reasonably well. We also develop a method for predicting price effects that extends Garmon [2017].

Date: 2023
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