Games hospitals play: Entry deterrence in hospital procedure markets

Leemore S. Dafny*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

40 Scopus citations

Abstract

Strategic investment models, though popular in the theoretical literature, have rarely been tested empirically. This paper develops a model of strategic investment in inpatient procedure markets, which are well-suited to empirical tests of this behavior. Potential entrants are easy to identify in such markets, enabling the researcher to accurately estimate the entry threat faced by different incumbents. I derive straightforward empirical tests of entry deterrence from a model of patient demand, procedure quality, and differentiated product competition. Using hospital data on electrophysiological studies, an invasive cardiac procedure, I find evidence of entry-deterring investment. These findings suggest that competitive motivations play a role in treatment decisions.

Original languageEnglish (US)
Pages (from-to)513-542
Number of pages30
JournalJournal of Economics and Management Strategy
Volume14
Issue number3
DOIs
StatePublished - Sep 2005

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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