Spatial Interaction, Spatial Multipliers, and Hospital Competition

Lee R Mobley, Harry Frech and Luc Anselin ()

University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara

Abstract: The hospital competition literature demonstrates that estimates of the effect of local market structure on competition are sensitive to geographic market definition. Our spatial lag approach effects smoothing of the explanatory variables across the discrete market boundaries. This approach results in robust estimates of the impact of market structure on hospital pricing, which can be used to estimate the full effect of changes in prices inclusive of spillovers that cascade through the neighboring hospital markets. In markets where concentration is relatively high before a proposed merger, we demonstrate that OLS estimates can lead to the wrong antitrust policy conclusion while the more conservative lag estimates do not.

Keywords: spatial econometrics; spatial lag model; spatial multiplier; spatial spillovers; hospital antitrust; hospital competition; strategic pricing; Nash bargaining (search for similar items in EconPapers)
Date: 2008-06-01
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Citations: View citations in EconPapers (1)

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