Empirical Studies of Business-to-Business Bargaining: Evidence from Hospital Input Markets

University Of Pennsylvania, Philadelphia PA

Investigators

Abstract

Intermediate goods markets make up nearly half of U.S. GDP, and prices in these markets are often determined by bargaining between buyers and suppliers. However, few empirical studies have examined intermediate goods markets and negotiated prices. This project aims to study economic and policy questions in intermediate goods markets, using a novel dataset on negotiated prices of medical supplies between hospitals and suppliers. The investigators will examine the role of information, market structures, and healthcare organizations in business-to-business price negotiations. This project will yield new insights into the fundamental determinants of health care costs. The proposed research will also have direct bearing on several current policy debates regarding transparency in hospital supply markets, antitrust treatment of hospitals and physician-hospital relationships, and Medicare reimbursement policy. This research project consists of three studies that provide one of the first comprehensive studies of markets for hospital supplies and negotiated prices. The first study analyzes the role of information in negotiated prices for coronary stents, using differences-in-differences identification strategies based on both timing of hospitals' joining a benchmarking database and new products entering the market. In the second study, the investigators link bargaining outcomes with market structures and hospital organizational characteristics to test bargaining theory and examine the role of organizational economics and market power in bargaining. The third study combines the hospital purchasing data with changes in Medicare procedure reimbursement to understand how these willingness-to-pay shocks are passed through the vertical supply chain.