Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Kurt R. Brekke
Hospital Mergers with Regulated Prices.
(), Luigi Siciliani
() and Odd Rune Straume
Abstract: We study the effects of a hospital merger using a spatial
competition framework with semialtruistic hospitals that invest in quality
and expend cost-containment effort facing regulated prices. We find that
the merging hospitals always reduce quality, whereas non-merging hospitals
respond by increasing (reducing) quality if qualities are strategic
substitutes (complements). A merger leads to higher average treatment cost
efficiency and, if qualities are strategic substitutes, might also increase
average quality in the market. If a merger leads to hospital closure, the
resulting effect on quality is positive (negative) for all hospitals in the
market if qualities are strategic substitutes (complements). Whether
qualities are strategic substitutes or complements depends on the degree of
altruism, the effectiveness of cost-containment effort, and the degree of
cost substitutability between quality and treatment volume.
Keywords: Hospital mergers; Quality competition; Cost efficiency; Antitrust.; (follow links to similar papers)
JEL-Codes: I11; I18; L13; L44; (follow links to similar papers)
31 pages, June 30, 2014
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