Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, January 31, 2017

Judge Neil Gorsuch - antitrust professor

It is official, President Trump has nominated Neil Gorsuch to the Supreme Court.  He regularly teaches as antitrust law at the University of Colorado.  Perhaps of interest, in his 2013 class, the first day's assignment was from the Pitofsky casebook (which some remember as the Milton Handler casebook).  This is not the standard econ heavy antitrust casebook (indeed, the only major casebook without an econ PhD author) and is probably the most left leaning of all of the major casebooks in terms of sales (Gavil, Baker, Kovacic & Wright, Areeda, Kaplow & Edlin; and Sullivan, Hovenkamp, Shelasnki & Leslie).

Updated: Correction - Gorsuch wrote Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Circuit  2013) and Four Corners Nephrology Associates, P.C. v. Mercy Medical Center of Durango, 582 F.3d 1216 (10th Circuit 2009). As a lawyer in private practice, he was involved in the famous Conwood case. Ben Klein and Josh Wright have a discussion of that case in an article here.

Further update: See also his opinion in KAY ELEC. CO-OP. v. CITY OF NEWKIRK, OKLA., 647 F.3d 1039 (10th Cir. 2011).

 

 

 

 

 

January 31, 2017 | Permalink | Comments (0)

Brexit, Post-Truth Politics and the Triumph of a Messy Vision of Democracy over Technocracy

Sandra Marco Colino, The Chinese University of Hong Kong (CUHK) describes Brexit, Post-Truth Politics and the Triumph of a Messy Vision of Democracy over Technocracy.

ABSTRACT: On 23 June 2016, the people of the United Kingdom voted to leave the European Union in a historic referendum. This paper is a reflection on the wider implications of the result, the adequacy of deciding such technical matters through direct democracy means, and the problems related to the disdain of technocracy and expert opinions in the era of post-truth politics. It stresses the need to value democracy by giving it a constructive meaning, and by protecting it from the populism and misinformation that can tarnish it. But the responsibility of the EU, it is argued, should not be ignored. Its institutions must strive towards greater engagement of the wider population in its benefits. In this sense, Brexit could be an opportunity to re-think the direction in which the European project is advancing. The author shares both her own personal experience as a Spaniard who lived and worked in the UK for 12 years, and her professional perspective as an expert on EU law and competition law.

 

January 31, 2017 | Permalink | Comments (0)

The Bottom-Up Approach on Competition – A Study on How Institutional, Procedural and Sanctionatory Frameworks Touch on the Very Substance of the EU Antitrust Desideratum

Vlad Dan Roman, Romanian Competition Council offers The Bottom-Up Approach on Competition – A Study on How Institutional, Procedural and Sanctionatory Frameworks Touch on the Very Substance of the EU Antitrust Desideratum.

ABSTRACT: One of today’s main policy concerns for the competition community in Brussels is the way in which national institutional, procedural and sanctioning frameworks have the aptitude and are sufficiently harmonized to guarantee a coherent application of the substantive aspects that European Union competition theory and law imply. As competition policies between the still twenty eight Member States have long been harmonized as the legal substantive similarities reflect this matter of fact, it is for the institutional and procedural set-ups to be assessed, in order to perceive the level of enforcement effectiveness that each European Competition Network party is able to deliver. With this regard, domestic instruments and procedures must exist and be interpreted in accordance with the Treaty objectives, so as to avoid any potential vulnerability for the complete achievement of the Union antitrust desideratum.

January 31, 2017 | Permalink | Comments (0)

Going Digital: How Online Competition Changed Market Definition and Swayed Competition Analysis in Fnac/Darty

Simon Genevaz and Jerome Vidal (both French Competition Authority) describe Going Digital: How Online Competition Changed Market Definition and Swayed Competition Analysis in Fnac/Darty.

ABSTRACT: On 27 July 2016, the French Competition Authority cleared Fnac's acquisition of its rival consumer electronics retailer Darty. The clearance was subject to a limited number of divestiture commitments (six stores), an admittedly leaner remedy than early observers may have expected. Online competition played a key role in the assessment of the transaction, a 3-to-2 merger in nationwide retail chains. In fact, the Fnac/Darty decision may be among the first in Europe to find that online and physical retailing are sufficiently substitutable to form a single product market. Evidently, including online retailers in the relevant market greatly contributed to mitigating the merger's anticompetitive effects and accepting relatively narrow remedies. This article explains the methodology and evidence used to broaden the relevant market and how the Authority analysed competition exerted by internet retailers on physical retail chains. It also assesses the decision's impact on future enforcement.

January 31, 2017 | Permalink | Comments (0)

Standard Essential Patents: Royalty Determination in the Supply Chain

Roberto Grasso, Wilmer advocates Standard Essential Patents: Royalty Determination in the Supply Chain.

ABSTRACT: Royalties must be calculated based, at most, on the smallest saleable patent-practicing unit, rather than the price of the end-product that incorporates that component. The value of a technology must correspond to the incremental inventive value of that technology as compared to alternative technologies before the standard is set. In case of complex end-products, a royalty must take into account the potential aggregate royalty demands for other SEPs. An SEP-holder must negotiate with and provide a FRAND license to anyone who requests it, regardless of which level of the value chain it operates.

January 31, 2017 | Permalink | Comments (0)

Monday, January 30, 2017

Lundbeck v Commission: Reverse Payment Patent Settlements as Restrictions of Competition by Object

Romano Subiotto QC and Jacopo Figus Diaz (both Cleary) describe Lundbeck v Commission: Reverse Payment Patent Settlements as Restrictions of Competition by Object.

ABSTRACT: The General Court upheld the Commission's finding that Lundbeck and generic producers of citalopram were at least potential competitors, that the reverse payment patent settlements at issue restricted competition by object, and that the Commission was not required to examine the situation that would have arisen had the agreements not been concluded.

January 30, 2017 | Permalink | Comments (0)

The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents

Gerard Llobet, Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR) and Jorge Padilla, Compass Lexecon discuss The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents.

ABSTRACT: It has been commonly argued that the decision of a large number of inventors to license complementary patents necessary for the development of a product leads to excessively large royalties. This well-known Cournot-complements or royalty-stacking effect would hurt efficiency and downstream competition. In this paper we show that when we consider patent litigation and introduce heterogeneity in the portfolio of different firms these results change substantially due to what we denote the Inverse Cournot effect. We show that the lower the total royalty that a downstream producer pays, the lower the royalty that patent holders restricted by the threat of litigation of downstream producers will charge. This effect generates a moderation force in the royalty that unconstrained large patent holders will charge that may overturn some of the standard predictions in the literature. Interestingly, though, this effect can be less relevant when all patent portfolios are weak making royalty stacking more important.

January 30, 2017 | Permalink | Comments (0)

Twenty Years in Antitrust and Lessons for a New Administration, Thursday, February 23, 2017

On February 23, 2017 the George Mason Law Review will be putting on its 20th Antitrust Symposium entitled “Twenty Years in Antitrust and Lessons for a New Administration.”

Twenty Years in Antitrust and Lessons for a New Administration

 

    Thursday, February 23, 2017
  •  
    8:00 AM  -  8:30 AM
    Registration & Breakfast
    Founders Hall Multipurpose Room
     Registered 
    8:30 AM  -  8:35 AM
    Welcome & Introduction
    All Panels will be held in Founders Hall Auditorium

    Henry N. Butler, Dean - George Mason University Antonin Scalia Law School

     Registered 
    8:35 AM  -  9:30 AM
    Opening Keynote Discussion

    Introduction – The Globalization of Competition Law in the Past 20 Years and the Advent of Brazilian Competition Law:
    Terry Calvani, Of Counsel - Freshfields Bruckhaus Deringer LLP


    Keynote Speaker:
    Alexandre Cordeiro Macedo, Commissioner - Administrative Council for Economic Defense (CADE)

     Registered 
    9:45 AM  -  11:00 AM
    Panel One: Chinese Merger Law

    Confirmed Speakers include:

    Jing He, Senior Consultant - AnJie Law Firm

    Randy Tritell, Director - Federal Trade Commission

    Joanna Tsai, Vice President - Charles River Associates

    Mark Whitener, Senior Counsel - General Electric Company


    Moderator: H. Steve Harris, Jr., Partner - Winston & Strawn LLP

     Registered 
    11:15 AM  -  12:30 PM
    Panel Two: From Staples to Staples – 20 Years of Merger Enforcement in the United States

    Confirmed Speakers include:

    Orley Ashenfelter, Joseph Douglas Green 1895 Professor of Economics - Princeton University

    George Cary, Partner - Cleary Gottlieb

    Deborah Feinstein, Director - Federal Trade Commission

    Matthew J. Reilly, Partner - Kirkland & Ellis LLP

    Chetan Sanghvi, Managing Director - NERA Economic Consulting


    Moderator: Paul Denis, Partner - Dechert LLP

     Registered 
    12:30 PM  -  2:00 PM
    Luncheon Conversation - FTC Commissioner Ohlhausen and former FTC Commissioner Wright

    Speakers:

    Maureen K. Ohlhausen, Commissioner - US Federal Trade Commission

    Joshua D. Wright, University Professor - George Mason University Antonin Scalia Law School; Senior Of Counsel - Wilson Soncini Goodrich & Rosati.

     Registered 
    2:00 PM  -  3:15 PM
    Panel Three: The Intersection of Intellectual Property & Competition Law

    Confirmed Speakers include:

    Hiram Andrews, Counsel - Freshfields Bruckhaus Deringer US LLP

    Jim Harlan, Director of Standards and Competition Policy - InterDigital

    Greg Sivinski, Assistant General Counsel - Microsoft

    Koren Wong-Ervin, Director - Global Antitrust Institute


    Moderator: Anne Layne-Farrar, Vice President - Charles River Associates

     Registered 
    3:30 PM  -  5:00 PM
    Panel Four: Globalization of Cartel Enforcement

    Confirmed Speakers include:

    Vinicius Marques de Carvalho, Fmr. President - CADE; current Yale World Fellow

    Minji Kim, Deputy Director - Korea Fair Trade Commission

    Bruce McCulloch, Partner - Freshfields Bruckhaus Deringer US LLP

    Gary Spratling, Partner - Gibson Dunn

    John Taladay, Partner - Baker Botts


    Moderator: The Honorable Douglas H. Ginsburg, Senior Judge - United States Court of Appeals for the District of Columbia Circuit; Professor of Law - George Mason University School of Law

     Registered 
    5:00 PM  -  5:10 PM
    Closing Remarks
     
     Registered 
    5:00 PM  -  6:00 PM
    Reception
    Founders Hall Gallery

January 30, 2017 | Permalink | Comments (0)

Reputation and Feedback Systems in Online Platform Markets

Steven Tadelis, University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) identifies Reputation and Feedback Systems in Online Platform Markets.

Abstract: Online marketplaces have become ubiquitous, as sites such as eBay, Taobao, Uber, and Airbnb are frequented by billions of users. The success of these marketplaces is attributed to not only the ease in which buyers can find sellers, but also the trust that these marketplaces help facilitate through reputation and feedback systems. I begin by briefly describing the basic ideas surrounding the role of reputation in facilitating trust and trade, and offer an overview of how feedback and reputation systems work in online marketplaces. I then describe the literature that explores the effects of reputation and feedback systems on online marketplaces and highlight some of the problems of bias in feedback and reputation systems as they appear today. I discuss ways to address these problems to improve the practical design of online marketplaces and suggest some directions for future research.

January 30, 2017 | Permalink | Comments (0)

An Economic Analysis of U.S. Airline Fuel Economy Dynamics from 1991 to 2015

Matthew E. Kahn, University of Southern California; National Bureau of Economic Research (NBER) and Jerry Nickelsburg, UCLA Anderson Forecast offer An Economic Analysis of U.S. Airline Fuel Economy Dynamics from 1991 to 2015.

ABSTRACT: Airline transport generates a growing share of global greenhouse gas emissions but as of late 2016, this sector has not faced U.S. fuel economy or emissions regulation. At any point in time, airlines own and lease a set of durable vehicles and have invested in human and physical capital and an inventory of parts to maintain these vehicles. Each airline chooses whether to scrap and replace airplanes in their fleet and how to utilize and operate their fleet of aircraft. We model these choices as a function of real jet fuel prices. When jet fuel prices are higher, airlines fly fuel inefficient planes slower, scrap older fuel inefficient planes earlier and substitute miles flown to their more fuel efficient planes. 

January 30, 2017 | Permalink | Comments (0)

Friday, January 27, 2017

The Competitive Effects of Information Sharing

John Asker, New York University - Leonard N. School of Business - Department of Economics, Chaim Fershtman, Tel Aviv University - Eitan Berglas School of Economics; Tinbergen Institute, Jihye Jeon, New York University (NYU) - Leonard N. Stern School of Business, and Ariel Pakes, National Bureau of Economic Research (NBER); Harvard University - Department of Economics examine The Competitive Effects of Information Sharing.

ABSTRACT: We investigate the impact of information sharing between rivals in a dynamic auction with asymmetric information. Firms bid in sequential auctions to obtain inputs. Their inventory of inputs, determined by the results of past auctions, are privately known state variables that determine bidding incentives. The model is analyzed numerically under different information sharing rules. The analysis uses the restricted experience based equilibrium concept of Fershtman and Pakes (2012) which we refine to mitigate multiplicity issues. We find that increased information about competitors’ states increases participation and inventories, as the firms are more able to avoid the intense competition in low inventory states. While average bids are lower, social welfare is unchanged and output is increased. Implications for the posture of antitrust regulation toward information sharing agreements are discussed.

January 27, 2017 | Permalink | Comments (0)

Complementarity Without Superadditivity

Steven Berry, Yale University - Department of Economics; National Bureau of Economic Research (NBER) Philip A. Haile, Yale University - Department of Economics; National Bureau of Economic Research (NBER) Mark A. Israel, Compass Lexecon, and Michael L. Katz University of California, Berkeley - Economic Analysis & Policy Group address Complementarity Without Superadditivity.

ABSTRACT: The distinction between complements, substitutes, and independent goods is important in many contexts. It is well known that when consumers’ conditional indirect utilities for two goods are superadditive, the goods are gross complements. Generalizing insights in Gans and King (2006) and Gentzkow (2007), we show that superadditivity between one pair of goods can also introduce complementarity between competing pairs of goods. One implication is that lower prices can result from a merger between producers of goods that themselves offer no superadditivity.

January 27, 2017 | Permalink | Comments (0)

When Does Aftermarket Monopolization Soften Foremarket Competition?

Yuk‐Fai Fong, Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management, Jin Li, Northwestern University - Department of Management & Strategy, and Ke Liu, Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ask When Does Aftermarket Monopolization Soften Foremarket Competition?

ABSTRACT: This paper investigates firms' abilities to tacitly collude when they each monopolize a proprietary aftermarket. When firms' aftermarkets are completely isolated from foremarket competition, they cannot tacitly collude more easily than single‐product firms. However, when their aftermarket power is contested by foremarket competition as equipment owners view new equipment as a substitute for their incumbent firm's aftermarket product, profitable tacit collusion is sustainable among a larger number of firms. Conditions under which introduction of aftermarket competition hinders firms' ability to tacitly collude are characterized.

January 27, 2017 | Permalink | Comments (0)

Thursday, January 26, 2017

Patents and Innovation in Economic History

Petra Moser (NYU) has a revisionist critique of Patents and Innovation in Economic History.

ABSTRACT: A strong tradition in economic history, which relies primarily on qualitative evidence and statistical correlations, has emphasized the importance of patents as a primary driver of innovation. Recent improvements in empirical methodology — through the creation of new datasets and advances in identification — have produced research that challenges this traditional view. The findings of this literature provide a more nuanced view of the effects of intellectual property and suggest that when patent rights have been too broad or too strong, they have actually discouraged innovation. This review summarizes the major results from this research and presents open questions.

 

January 26, 2017 | Permalink | Comments (0)

Standard Setting Organizations and Standard Essential Patents: Voting and Markets

Dan Spulber, Northwestern has penned the controversial Standard Setting Organizations and Standard Essential Patents: Voting and Markets.

ABSTRACT: The key finding is that Standard Setting Organizations (SSOs) choose efficient technology standards because voting power and market power have counterbalancing effects. Agents on the long side of the market have less added value in the marketplace but more voting power in cooperative organizations and conversely for the short side of the market. In a two-stage model, industry members choose technology standards by voting and then compete in the marketplace. Even when there are disagreements among vertical industry groups, SSO members vote for the efficient standard unanimously. When there are Standard Essential Patents (SEPs), technology adopters also vote for the efficient standard unanimously. Inventors that own SEPs will support the efficient standard under some voting rules. When there are disagreements within industry groups, SSO members choose efficient standards by majority rule, with or without SEPs. When the efficient standard has SEPs and the inefficient standard does not, SSO members choose the efficient standard with a drastic innovation or, when the innovation is non-drastic, with particular voting rules. The results help explain the choice of technology standards by SSOs, the design of SSO voting rules, and the selection of SSO rules governing intellectual property (IP).

January 26, 2017 | Permalink | Comments (0)

Clasf workshop Warsaw 28 April 2017, “Reform of Regulation 1/2003 –Effectiveness of the NCAs and Beyond

The Competition Law Scholars Forum (CLaSF) and the Centre for Antitrust and Regulatory Studies at the University of Warsaw (CARS)

Workshop-“Reform of Regulation 1/2003 –Effectiveness of the NCAs and Beyond”

At the University of Warsaw, Faculty of Management, Szturmowa 1/3 (Warsaw, Poland) on Friday 28th April 2017

Mandatory prior registration by 9th April at cars@wz.uw.edu.pl

 

PROGRAMME

09:30 – 10.00: Registration

10.00: Introduction: Prof Barry Rodger (CLaSF), Prof Alojzy Z. Nowak, Dean / Dr Maciej Bernatt (CARS)

10.10-10.45 Keynote Speaker TBC

10.45-11.00 Coffee

11.00-12.15 NCAs: Design and Context- Chair: Prof Andreas Stephan, UEA

Miguel Sousa Ferro, Institutional Design of National Competition Authorities: EU Requirements, University of Lisbon Law School

Katalin Cseres, Functioning of the European Competition Network: The problem of accountability University of Amsterdam

Marek Martyniszyn, Maciej Bernatt, Embracing and Nurturing the Free Market: Lessons from Poland through the Lens of Competition Law and Policy, Queen’s University, Belfast and Centre for Antitrust and Regulatory Studies, University of Warsaw

12.15-13:30 NCAs Institutional Setting and Relation with Courts:- Chair: TBC

Annalies Outhuijse, Effective national enforcement of the prohibition of anti-competitive agreements University of Groningen

Maciej Bernatt, Judicial Review of NCAs decisions – a case of Central-Eastern Europe; Centre for Antitrust and Regulatory Studies, University of Warsaw

Francisco Marcos, Disagreements in competition: dissenting opinions in competition authorities, IE Law School

13:30-14:30 LUNCH

14:30- 15.45 NCAs toolbox:- Chair: Prof. Doris Hildebrand

Evi Mattioli, Tim Bruyninckx, Why NCAs do not enforce EU competition law extraterritorially: A view from the perspective of agency theory KU Leuven and EUI

Carsten Koenig, The imposition of “follow-on penalties” on managers and employees?, University of Goettingen

Eva Lachnit, Individual Guidance: Effective Tool or Enforcer’s Nightmare? Utrecht University

15.45-16:00 Coffee Break

16:00-17:15 Due Process, Proportionality and Independence:- Chair: TBC

Maciej Bernatt, Marco Botta, Alexandr Svetlicinii, The European Inquisition is not too Bad; The Application of the Right of Defense by the European Commission and the Competition Authorities of the New EU Member States CARS, Warsaw; Max Planck Institute for Innovation and Competition and University of Macau

Antonio Robles, Effectiveness, Proportionality And Deterrence under Spanish Competition Law Universidad Carlos III de Madrid

Pieter Van Cleynenbreugel, Streamlining NCA independence in reforming Regulation 1/2003: time to take incongruent accountability realities (more) seriously? University of Liège

17:15-17:30 Closing Address TBC

17:30 Closing remarks: Prof Stanisław Piątek (CARS), Prof Barry Rodger (CLaSF)

17.45 Taxis to Central Warsaw for bar/restaurant for speakers and participants

January 26, 2017 | Permalink | Comments (0)

Statement of Acting FTC Chairman Ohlhausen on Appointment by President Trump

Ohlhausen states:

“I am deeply honored that President Trump has asked me to serve as Acting Chairman of the FTC and to preserve America’s true engine of prosperity: a free, honest, and competitive marketplace,” Acting Chairman Ohlhausen said. “In pursuit of that mission, I will work to protect all consumers from fraud, deception, and unfair practices.  I will safeguard competition while preserving American innovation and promoting economic liberty for all citizens. Finally, I will ensure the Commission minimizes the burdens on legitimate business as we carry out this vital work.”

January 26, 2017 | Permalink | Comments (0)

A Proposal to Limit the Anti-Competitive Power of Institutional Investors

Eric A. Posner, University of Chicago - Law School, Fiona M. Scott Morton, Yale School of Management; National Bureau of Economic Research (NBER), and E. Glen Weyl, Microsoft Research New York City; Yale University offer A Proposal to Limit the Anti-Competitive Power of Institutional Investors.

ABSTRACT: Recent scholarship has shown that mutual funds and other institutional investors may cause softer competition among product market rivals because of their significant ownership stakes in competing firms in concentrated industries. While recent calls for litigation against them under Section 7 of the Clayton Act are understandable, private or indiscriminate government litigation could also cause significant disruption to equity markets because of its inherent unpredictability and would fail to eliminate most of the harms from common ownership. To minimize this disruption while achieving competitive conditions in oligopolistic markets, the Department of Justice and the Federal Trade Commission should take the lead by adopting a public enforcement policy of the Clayton Act against institutional investors — the original authors of the Act intended it to be used. We outline such a policy in this article. Investors in firms in well-defined oligopolistic industries must choose either to limit their holdings of an industry to a small stake (no more than 1% of the total size of the industry) or to hold the shares of only a single “effective firm.” Investors that violate this rule face government litigation. Using simulations based on empirical evidence, we show that under broad assumptions this rule would generate large competitive gains while having minimal negative effects on diversification and other values. The rule would also improve corporate governance by institutional investors.

January 26, 2017 | Permalink | Comments (0)

Competition Policy in the Internet-Based Industries: Do We Need to Reboot the Debate?

Ignacio de Leon, Inter-American Development Bank, asks Competition Policy in the Internet-Based Industries: Do We Need to Reboot the Debate?

ABSTRACT: This paper exposes the limits of competition policy in the assessment of Internet-based industries. These limits are traceable to a static/structural paradigm in neoclassical economics that finds innovation an alien concept that is difficult to grasp and analyze under the basic equilibrium tenets of this mainstream paradigm. Accordingly, Internet-based industries run through online platforms are perceived by competition analysts awkwardly; two-sided markets do not align well to the conventional market power assessment done under competition policy. Proper assessment of disruptive or incremental innovation requires changing the analytical framework in order to make the causes of innovation taking place at digital platforms visible. The main determinant of innovation is the appropriability that innovators develop through dynamic capabilities and strategic use of Intellectual Property. Under this assessment, digital platforms fulfill an important welfare-enhancing role, in promoting reducing the search for information costs, stimulating further innovation by slicing, apportioning and recombining customers, as well as several other long run benefits

January 26, 2017 | Permalink | Comments (0)

Wednesday, January 25, 2017

Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population

Carrie Colla, The Dartmouth Institute for Health Policy and Clinical Practice, Julie Bynum, Dartmouth College - Dartmouth Institute for Health Policy and Clinical Practice, Andrea Austin, Dartmouth College - Dartmouth Institute for Health Policy and Clinical Practice, and Jonathan S. Skinner, Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER) identify Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population.

ABSTRACT: Theoretical models of competition with fixed prices suggest that hospitals should compete by increasing quality of care for diseases with the greatest profitability and demand elasticity. Most empirical evidence regarding hospital competition is limited to heart attacks, which in the U.S. generate positive profit margins but exhibit very low demand elasticity – ambulances usually take patients to the closest (or affiliated) hospital. In this paper, we derive a theoretically appropriate measure of market concentration in a fixed-price model, and use differential travel-time to hospitals in each of the 306 U.S. regional hospital markets to instrument for market concentration. We then estimate the model using risk-adjusted Medicare data for several different population cohorts: heart attacks (low demand elasticity), hip and knee replacements (high demand elasticity) and dementia patients (low demand elasticity, low or negative profitability). First, we find little correlation within hospitals across quality measures. And second, while we replicate the standard result that greater competition leads to higher quality in some (but not all) measures of heart attack quality, we find essentially no association between competition and quality for what should be the most competitive markets – elective hip and knee replacements. Consistent with the model, competition is associated with lower quality care among dementia patients, suggesting that competition could induce hospitals to discourage unprofitable patients.

January 25, 2017 | Permalink | Comments (0)