David Dranove

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We call markets in which intermediaries sell networks of suppliers to consumers who are uncertain about their needs "option demand markets." In these markets, suppliers may grant the intermediaries discounts in order to be admitted to their networks. We derive a measure of each supplier's market power within the network; the measure is based on the(More)
Health care report cards—public disclosure of patient health outcomes at the level of the individual physician or hospital or both—may address important informational asymmetries in markets for health care, but they may also give doctors and hospitals incentives to decline to treat more difficult, severely ill patients. Whether report cards are good for(More)
Existing empirical estimates of merger effects are compromised by the fact that merging and nonmerging entities differ in unobserved ways that independently affect outcomes of interest. To obtain an unbiased estimate of the effect of consummated mergers, I propose an approach that focuses on the response of rivals to mergers and accounts for the endogeneity(More)
This paper shows that a hospital whose objective function includes output as well as profits may raise price to private paying patients in response to cuts in the price it receives for Madicaid or Medicaid patients. Evidence is presented to show that hospitals in Illinois 'cost-shifted' in this manner in response to substantial reductions in Medicaid(More)
A controversial technique for testing the hypothesis that physicians induce demand involves two stage least squares (TSLS) regression analysis of cross-section data on physician supply and utilization. This paper tests the power of TSLS by applying it where there is at most only a trivial amount of demand inducement--the demand for childbirths. We find(More)
We investigate whether pairwise hospital consolidation leads to cost savings. We use a unified empirical methodology to assess both systems and mergers. Our comparison group for each consolidation consists of 10 'pseudo-mergers' chosen based on propensity scores. Cost function estimates reveal that consolidation into systems does not generate savings, even(More)
Estimated responses to report cards may reflect learning about quality that would have occurred in their absence (“market-based learning”). Using panel data on Medicare HMOs, we examine the relationship between enrollment and quality before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. We find consumers learn from(More)
Recent attention has been given to the hypothesis that local hospital competition takes the form of costly duplication of specialized services--the "medical arms race." This contrasts with the hypothesis that the supply of specialized services is determined solely by "the extent of the market." We develop a model predicting the provision of specialized(More)
Recent developments in the theory of agency--the relationship that arises e when a principal delegates authority to an agent--offer powerful insights into the organization of health care delivery systems. In this paper we first provide an overview of the agency literature and then illustrate how relationships between doctors, patients, and hospitals can be(More)
Most employees contribute towards the cost of employer-sponsored insurance, despite tax laws that favor zero contributions. Contribution levels vary markedly across firms, and the average contribution (as a percentage of the premium) has increased over time. We offer a novel explanation for these facts: employers raise contribution levels to encourage their(More)