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 language | English (US) |
|---|---|
| Pages (from-to) | 513-542 |
| Number of pages | 30 |
| Journal | Journal of Economics and Management Strategy |
| Volume | 14 |
| Issue number | 3 |
| DOIs | |
| State | Published - Sep 2005 |
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics and Econometrics
- Strategy and Management
- Management of Technology and Innovation