Institutional Affiliation: Northwestern University
|Internal versus External Growth in Industries with Scale Economies: A Computational Model of Optimal Merger Policy|
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We study optimal merger policy in a dynamic model in which the presence of scale economies implies that firms can reduce costs through either internal investment in building capital or through mergers. The model, which we solve computationally, allows firms to invest or propose mergers according to the relative profitability of these strategies. An antitrust authority is able to block mergers at some cost. We examine the optimal policy when the antitrust authority can commit to a policy rule and when it cannot commit, and consider both consumer value and aggregate value as possible objectives of the antitrust authority. We find that optimal policy can differ substantially from what would be best considering only welfare in the period the merger is proposed. We also find that the ability t...
Published: Ben Mermelstein & Volker Nocke & Mark A. Satterthwaite & Michael D. Whinston, 2020. "Internal versus External Growth in Industries with Scale Economies: A Computational Model of Optimal Merger Policy," Journal of Political Economy, vol 128(1), pages 301-341.
|Is More Information Better? The Effects of 'Report Cards' on Health Care Providers|
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Health care report cards - public disclosure of patient health outcomes at the level of the individual physician and/or hospital - may address important informational asymmetries in markets for health care, but they may also give doctors and hospitals incentives to decline to treat more difficult, severely ill patients. Whether report cards are good for patients and for society depends on whether their financial and health benefits outweigh their costs in terms of the quantity, quality, and appropriateness of medical treatment that they induce. Using national data on Medicare patients at risk for cardiac surgery, we find that cardiac surgery report cards in New York and Pennsylvania led both to selection behavior by providers and to improved matching of patients with hospitals. On net, ...
Published: Dranove, David, Daniel Kessler, Mark McClellan and Mark Satterthwaite. "Is More Information Better? The Effects Of `Report Cards' On Health Care Providers," Journal of Political Economy, 2003, v111(3,Jun), 555-588. citation courtesy of
|The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers|
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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 m...