Estimation and Identification of Merger Effects: An Application to Hospital Mergers
- 1 August 2009
- journal article
- Published by University of Chicago Press in The Journal of Law and Economics
- Vol. 52 (3), 523-550
- https://doi.org/10.1086/600079
Abstract
Existing empirical estimates of merger effects are compromised by the fact that merging and nonmerging entities differ in unobserved ways that independently affect outcomes of interest. To obtain an unbiased estimate of the effect of consummated mergers, I propose an approach that focuses on the response of rivals to mergers and accounts for the endogeneity of exposure to these mergers. I apply this approach to evaluate the impact of independent hospital mergers in the United States between 1989 and 1996. Using the physical colocation of rivals as an instrument for whether they merge, I find a sizeable, one-time increase in price following a rival's merger, with the greatest increase occurring among hospitals nearest the merging hospitals. These results are more consistent with predictions from structural models of the hospital industry than with prior observational estimates of the effects of hospital mergers. (c) 2009 by The University of Chicago. All rights reserved..Keywords
This publication has 16 references indexed in Scilit:
- How Do Hospitals Respond to Price Changes?American Economic Review, 2005
- Hospital consolidation and costs: another look at the evidenceJournal of Health Economics, 2003
- Competition among HospitalsThe RAND Journal of Economics, 2003
- Market restructuring and pricing in the hospital industryJournal of Health Economics, 2001
- Mergers and Exclusionary Practices in Health Care MarketsJournal of Economics & Management Strategy, 1999
- The Effects of Market Concentration and Horizontal Mergers on Hospital Costs and PricesInternational Journal of the Economics of Business, 1998
- Recent Theory and Evidence on Competition in Hospital MarketsJournal of Economics & Management Strategy, 1994
- The competitive effects of horizontal mergers in the hospital industry: A closer lookJournal of Health Economics, 1991
- The competitive effects of horizontal mergers in the hospital industryJournal of Health Economics, 1989
- Horizontal mergers, collusion, and stockholder wealthJournal of Financial Economics, 1983