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American Economic Review: Vol. 103 No. 1 (February 2013)

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Price Discrimination and Bargaining: Empirical Evidence from Medical Devices

Article Citation

Grennan, Matthew. 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices." American Economic Review, 103(1): 145-77.

DOI: 10.1257/aer.103.1.145

Abstract

Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict different prices to different buyers are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (i) more uniform pricing works against hospitals by softening competition; and (ii) results depend ultimately on a previously unexplored bargaining effect. (JEL C78, L13, L14, L64)

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Authors

Grennan, Matthew (U Toronto)

JEL Classifications

C78: Bargaining Theory; Matching Theory
L13: Oligopoly and Other Imperfect Markets
L14: Transactional Relationships; Contracts and Reputation; Networks
L64: Other Machinery; Business Equipment; Armaments


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