On the Bright Side of Market Concentration in a Mixed-Oligopoly Healthcare Industry

33 Pages Posted: 2 Mar 2021

See all articles by Michele Bisceglia

Michele Bisceglia

University of Bergamo - Department of Management, Economics and Quantitative Methods; University of Toulouse 1 - Toulouse School of Economics (TSE)

Jorge Padilla

Compass Lexecon

Salvatore Piccolo

Compass Lexecon

Pekka Sääskilahti

Compass Lexecon

Date Written: March 1, 2021

Abstract

We describe the healthcare industry as a mixed oligopoly, where a public and two private providers compete, and examine the effects of a merger between two private healthcare providers on prices,
quality, and consumer surplus. When the price and quality of the public provider are regulated, the cost synergies required for the merger to increase consumer welfare are less significant than in a setting with only profit-maximizing providers. When, instead, the public provider can adjust its policy to the rivals' behavior and maximizes a weighted sum of profits and consumer surplus (i.e., it has 'semi-altruistic' preferences), we find that the merger is consumer surplus increasing if the public provider is sufficiently altruist, in some cases even absent efficiencies. These results suggest that ignoring the role and objectives of the public sector in the healthcare industry may lead agencies to reject mergers that, while would decrease consumer welfare in fully privatized industries, would increase it in mixed oligopolies.

Keywords: Antitrust, Healthcare industry, Quality, Mergers, Mixed oligopoly, Regulation

JEL Classification: I11, I18, L13, L44

Suggested Citation

Bisceglia, Michele and Padilla, Jorge and Piccolo, Salvatore and Sääskilahti, Pekka, On the Bright Side of Market Concentration in a Mixed-Oligopoly Healthcare Industry (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3795336 or http://dx.doi.org/10.2139/ssrn.3795336

Michele Bisceglia (Contact Author)

University of Bergamo - Department of Management, Economics and Quantitative Methods ( email )

Salvecchio 19
Bergamo, 24129
Italy

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

Salvatore Piccolo

Compass Lexecon ( email )

United States

Pekka Sääskilahti

Compass Lexecon ( email )

Helsinki
Finland

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