Informing Antitrust Enforcement: Empirical Evidence on Oligopoly Markets
Sunday, Jan. 9, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Ginger Zhe Jin, University of Maryland
Vertical Integration of Healthcare Providers Increases Self-Referrals and Can Reduce Downstream Competition: The Case of Hospital-Owned Skilled Nursing Facilities
AbstractThe landscape of the U.S. healthcare industry is changing dramatically as healthcare providers expand both within and across markets. While federal antitrust agencies have mounted several challenges to same-market combinations, they have not challenged any non-horizontal affiliations – including vertical integration of providers along the value chain of production. The Clayton Act prohibits combinations that “substantially lessen” competition; few empirical studies have focused on whether this is the source of harm from vertical combinations. We examine whether hospitals that are vertically integrated with skilled nursing facilities (SNFs) lessen competition among SNFs by foreclosing rival SNFs from access to the most lucrative referrals. Exploiting a plausibly exogenous shock to Medicare reimbursement for SNFs, we find that a 1 percent increase in a patient’s expected profitability to a SNF increases the probability that a hospital self-refers that patient (i.e., to a co-owned SNF) by 2.5 percent. We find no evidence that increased self-referrals improve patient outcomes or change post-discharge Medicare spending. Additional analyses show that when integrated SNFs are divested by their parent hospitals, independent rivals are less likely to exit. Together, the results suggest vertical integration in this setting may reduce downstream competition without offsetting benefits to patients or payers.
Playlisting Favorites: Measuring Platform Bias in the Music Industry
AbstractPlatforms are growing increasingly powerful, raising questions about whether their power might be exercised with bias. While bias is inherently difficult to measure, we identify a context within the music industry that is amenable to bias testing. Our approach requires ex ante platform assessments of commercial promise -- such as the rank order in which products are presented -- along with information on eventual product success. A platform is biased against a product type if it attains greater success, conditional on ex ante assessment. Theoretical considerations and voiced industry concerns suggest the possibility of platform biases in favor of major record labels, and industry participants also point to anti-female bias. Yet, using data on Spotify curators' rank of songs on New Music Friday playlists in 2017, we find that Spotify's New Music Friday rankings favor independent-label music as well as music by female artists.
Colluding Against Environmental Regulation
AbstractWe study collusion among firms in response to imperfectly monitored environmental regulation. Firms improve market profits by shading pollution and evade noncompliance penalties by shading jointly. We quantify the welfare effects of alleged collusion among three German automakers to reduce the size of diesel exhaust fluid (DEF) tanks, an emission control technology used to comply with air pollution standards. We develop a structural model of the European automobile industry (2007-2018), where smaller DEF tanks create more pollution damages, but improve buyer and producer surplus by freeing up valuable trunk space and reducing production costs. We find that choosing small DEF tanks jointly reduced the automakers’ expected noncompliance penalties by at least 560 million euros. Antitrust and noncompliance penalties would reach between 1.46 and 14.63 billion euros to remedy the welfare damages of the alleged collusion.
- L4 - Antitrust Issues and Policies
- L1 - Market Structure, Firm Strategy, and Market Performance