Physician Market Power--Evidence from the Allocation of Malpractice Premiums

Norman K Thurston

Economic Inquiry, 2001, vol. 39, issue 3, 487-98

Abstract: Based on evidence from variations in malpractice premiums, physicians have local market power, at least in some dimensions. It is observed that higher-cost physicians pass on a significant portion of idiosyncratic costs to patients as higher prices. I test two hypothesized sources of this market power: barriers to entry from specialization and relatively inelastic firm-level demand for certain services. Examining the relationship of physician-specific malpractice premiums to fees, I find no observable difference in the ability of surgeons and nonsurgeons to pass on these costs; however, both types of physicians pass them on more to surgical than to nonsurgical patients. Copyright 2001 by Oxford University Press.

Date: 2001
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