Entry Deterrence in Hospital Procedure Markets: A Simple Model of Learning-By-Doing

Leemore S. Dafny

No 9871, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the strategic behavior of hospitals in one of their primary output markets: inpatient surgical procedures. High levels of learning-by-doing in surgical fields may act as a barrier to entry. I investigate whether incumbent hospitals facing prospective entry in a procedure market manipulate their procedure volumes to produce such a barrier. I derive straightforward empirical tests from a model of patient demand, procedure quality, and differentiated product competition. Using hospital data on electrophysiological studies, an invasive cardiac procedure, I find evidence of entry-deterring investment in procedure volume. These findings suggest that competitive motivations may play a role in treatment decisions.

JEL-codes: I2 L1 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-edu, nep-ent, nep-hea and nep-ind
Note: EH
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