nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒07‒10
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Downstream labeling and upstream price competition By Bonroy, O.; Lemarié, S.
  2. Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS By Zack Cooper; Stephen Gibbons; Simon Jones; Alistair McGuire

  1. By: Bonroy, O.; Lemarié, S.
    Abstract: The paper analyses the economic consequences of labeling in a setting with two vertically related markets. Labeling on the downstream market affects upstream price competition through two effects : a differentiation effect and a ranking effect. The magnitude of these two effects determines who in the supply chain will receive the benefits and who will bear the burden of labeling. For instance, whenever the ranking effect dominates the differentiation effect, the low quality upstream firm loses from labeling while all downstream actors are individually better off. By decreasing the low quality input price, the label acts then as a subsidy which assures an increase of the downstream market welfare. This analysis furthers our understanding of the economic consequences of the public labeling in cases like restaurants or GMOs.
    JEL: L15 L50
    Date: 2010
  2. By: Zack Cooper; Stephen Gibbons; Simon Jones; Alistair McGuire
    Abstract: This paper uses a difference-in-difference estimator to test whether the introduction of patientchoice and hospital competition in the English NHS in January 2006 has prompted hospitalsto become more efficient. Efficiency was measured using hospitals' average length of stay(LOS) for patients undergoing elective hip replacement. LOS was broken down into its twokey components: the time from a patient's admission until their surgery and the time fromtheir surgery until their discharge. Our results illustrate that hospitals exposed to competitionafter a wave of market-based reforms took steps to shorten the time patients were in thehospital prior to their surgery, which resulted in a decrease in overall LOS. We find thathospitals shortened patients' LOS without compromising patient outcomes or by operating onhealthier, wealthier or younger patients. Our results suggest that hospital competition withinmarkets with fixed prices can increase hospital efficiency.
    Keywords: Hospital Competition, Market Structure, Prospective Payment, Incentive Structure
    JEL: C21 I18 L1 R0
    Date: 2010–06

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