TY  - JOUR
AU  - Abraham,Jean M.
AU  - Gaynor,Martin S.
AU  - Vogt,William B.
TI  - Entry and Competition in Local Hospital Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11649
PY  - 2005
Y2  - October 2005
UR  - http://www.nber.org/papers/w11649
L1  - http://www.nber.org/papers/w11649.pdf
N1  - Author contact info:
Jean Abraham
Department of Health Policy and Management
University of Minnesota
20 Delaware St SE
MMC 729
Minneapolis, MN 55455
E-Mail: abrah042@umn.edu

Martin Gaynor
Heinz College
Carnegie Mellon University
4800 Forbes Avenue,,Room 3008
Pittsburgh, PA 15213-3890
Tel: 412/268-7933
Fax: 412/268-5338
E-Mail: mgaynor@cmu.edu

William B. Vogt
513 Brooks Hall
Department of Economics
Terry College of Business
University of Georgia
Athens, GA  30602
Tel: 706-542-3970
Fax: 706-542-3376
E-Mail: william.b.vogt@gmail.com
M2  - featured in NBER digest on 2005-10-03
AB  - There has been considerable consolidation in the hospital industry in recent years. Over 900 deals occurred from 1994-2000, and many local markets, even in large urban areas, have been reduced to monopolies, duopolies, or triopolies. This surge in consolidation has led to concern about competition in local markets for hospital services. We examine the effect of market structure on competition in local hospital markets -- specifically, does the hardness of competition increase with the number of firms? We extend the entry model developed by Bresnahan and Reiss to make use of quantity information, and apply it to data on the U.S. hospital industry. In the hospital markets we examine, entry leads to a quick convergence to competitive conduct. Entry reduces variable profits and increases quantity. Most of the effects of entry come from having a second and a third firm enter the market. The fourth entrant has little estimated effect. The use of quantity information allows us to infer that entry is consumer-surplus-increasing.
ER  -