The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractElzinga/Hogarty inflow/outflow analysis is a mainstay of geographic market definition in antitrust analysis. For example, U.S. antitrust agencies lost several hospital merger challenges when evidence showed that a nontrivial fraction of local patients traveled outside the local community for care. We show that the existence of traveling consumers may not limit seller market power with respect to non-traveling consumers--a phenomenon we label the silent majority fallacy. We estimate a random coefficients logit model of hospital demand and use the estimates to predict the increase in price that various mergers would generate. Two distinct methods of predicting the price increase are implemented and both indicate that even in suburban areas with high outflows of consumers, some hospital mergers could lead to significant price increases.

Spatial Interaction, Spatial Multipliers and Hospital Competition

“…Recent efforts have focused on using demand substitution parameters defined from hospital choice models (Kessler and McClellan, 2000;Gaynor and Vogt, 2000;Capps, Dranove, Greenstein, and Satterthwaite, 2001). 2 Capps et al make explicit the impact of travel elasticity of demand on overall demand elasticity of substitution, which is a key parameter in the dynamics of hospital competition.…”

“…2 Capps et al make explicit the impact of travel elasticity of demand on overall demand elasticity of substitution, which is a key parameter in the dynamics of hospital competition. Capps et al (2001) posit that price elasticity of demand ( η j d )is directly proportional to the elasticity of time ( η j t ) spent by patients traveling to hospital:…”

Określanie Zasięgu Geograficznego Rynku Cukru Z Wykorzystaniem Metody Elzinga−hogarty

“…Secondly, there is a risk of too broad market definition, which will overlook an undiscovered market existing as part of a defined area (Werden, 1981as in: Wårell, 2005. A specific type of a too broad market definition in the E-H method is the so-called silent majority fallacy, as descried by Capps et al (2001). The fallacy refers in particular to services, in case of which the research covers the flows of consumers (and not goods) seeking for services (e.g.…”

“…A travelling "minority" of consumers may be characterised by very different preferences and behaviours than the "silent majority" of consumers that does not travel in search for services. Consequently, drawing conclusions based on the "minority" flows may lead to faulty suppositions on the "silent majority" and too broad market definition (Capps et al, 2001). The risk of such a fallacy appears in the case of highly differentiated services and products -as regards location and other dimensions (Capps et al, 2001) -thus the case does not pertain to the sugar market, which is a typical good, not a varied product.…”

“…Consequently, drawing conclusions based on the "minority" flows may lead to faulty suppositions on the "silent majority" and too broad market definition (Capps et al, 2001). The risk of such a fallacy appears in the case of highly differentiated services and products -as regards location and other dimensions (Capps et al, 2001) -thus the case does not pertain to the sugar market, which is a typical good, not a varied product. To sum up, the results obtained by the authors seem to be hard to question if one bases only on the criticism of the E-H method as such.…”