The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers

Cory S. Capps, David Dranove, Shane Greenstein and Mark Satterthwaite

No 8216, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Elzinga/Hogarty inflow/outflow analysis is a mainstay of geographic market definition in antitrust analysis. For example, U.S. antitrust agencies lost several hospital merger challenges when evidence showed that a nontrivial fraction of local patients traveled outside the local community for care. We show that the existence of traveling consumers may not limit seller market power with respect to non-traveling consumers--a phenomenon we label the silent majority fallacy. We estimate a random coefficients logit model of hospital demand and use the estimates to predict the increase in price that various mergers would generate. Two distinct methods of predicting the price increase are implemented and both indicate that even in suburban areas with high outflows of consumers, some hospital mergers could lead to significant price increases.

JEL-codes: I1 L4 (search for similar items in EconPapers)
Date: 2001-04
New Economics Papers: this item is included in nep-hea
Note: EH IO
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Citations: View citations in EconPapers (23)

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