Abraham J, Gaynor M, & Vogt W (2003)

‘Entry and Competition in Local Hospital Markets’

CMPO working paper 03/088

• Investigates how hospital competition increases as the number of hospitals in a market increases.
• Uses cross-section data on U.S. hospitals to estimate the level of competition in local hospital markets, and to analyse how this chances hospital behaviour.

Key results:

• The minimum population necessary to support a single hospital in a local market is small (2,073 people).
• Hospital conduct changes rapidly with increasing market entry. In fact most of the impact on competition comes from a second hospital entering a one hospital market.
• Entry by competitors reduces hospital’s variable profits and increases patient welfare –through reduced prices and/or improved quality.

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