Estimation and identification of merger effects
Subtitle: an application to hospital mergers
By: Leemore S. Dafny.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11673; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11673.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Hospital mergers.; Consolidation and merger of corporations -- Mathematical models.
Description: "Advances in structural demand estimation have substantially improved economists' ability to forecast the impact of mergers.  However, these models rely on extensive assumptions about consumer choice and firm objectives, and ultimately observational methods are needed to test their validity.  Observational studies, in turn, suffer from selection problems arising from the fact that merging entities differ from non-merging entities in unobserved ways.  To obtain an accurate estimate of the ex-post effect of consummated mergers, I propose a combination of rival analysis and instrumental variables.  By focusing on the effect of merger on the behavior of rival firms, and instrumenting for these mergers, unbiased estimates of the effect of merger on market outcomes can be obtained.  Using this methodology, I evaluate the impact of all independent hospital mergers between 1989 and 1996 on rivals' prices.  I find sharp increases in rival prices following merger, with the greatest effect on the closest rivals.  The results for this industry are more consistent with predictions from structural models than with prior observational estimates"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/13/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.