Multimarket Contact in the Hospital Industry
- American Economic Journal: Economic Policy (Forthcoming)
Hospitals in the U.S. increasingly belong to multihospital systems that operate in numerous geographic markets. A large literature in management and economics suggests that competition between firms may be softened as a result of multimarket contact – i.e., firms competing with one another in multiple markets simultaneously. Exploiting plausibly exogenous variation in multimarket contact generated by out-of-market consolidation, I find that increases in multimarket contact over the 2000-2010 period led to higher hospital prices. These results suggest that continued hospital consolidation may produce higher prices even if that consolidation only minimally affects within-market concentration.
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