TY  - JOUR
AU  - Capps,Cory S.
AU  - Dranove,David
AU  - Greenstein,Shane
AU  - Satterthwaite,Mark
TI  - The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8216
PY  - 2001
Y2  - April 2001
UR  - http://www.nber.org/papers/w8216
L1  - http://www.nber.org/papers/w8216.pdf
N1  - Author contact info:
cory capps
Bates White LLC.
1300 Eye St. NW, Suite 600E
Washington, DC 20005
direct: 202.216.1151
fax: 202.408.7838
E-Mail: c-capps@northwestern.edu

David Dranove
Management & Strategy Department
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208-2001
E-Mail: d-dranove@kellogg.northwestern.edu

Shane Greenstein
The Elinor and Wendell Hobbs Professor
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208-2013
Tel: 847/467-5672
Fax: 847/467-1777
E-Mail: greenstein@kellogg.northwestern.edu

Mark Satterthwaite
Northwestern University
E-Mail: m-satterthwaite@northwestern.edu
AB  - 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.
ER  -