Issue 3

Volume 29 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Fall 2020

Hospital performance standards and medical pricing: The impact of information disclosure in cardiac care

Avi Dor, William Encinosa, and Kathleen Carey
A policy concern is that the initiation of Hospital Compare (HC) reporting in Medicare provided leverage to insurers in price negotiations for lowering private sector prices without regard to hospital performance. Using the sequential Nash bargaining framework we provide economic intuition to the contrary: while average hospital prices decline under quality disclosures, hospitals with above‐average quality are able to exert a stronger bargaining position, consequently capturing prices above the market rate.

Entry limiting agreements: First‐mover advantage, authorized generics, and pay‐for‐delay deals

Farasat A. S. Bokhari, Franco Mariuzzo, and Arnold Polanski
During patent litigation, pay‐for‐delay (P4D) deals involve a payment from a patent holder of a branded drug to a generic drug manufacturer to delay entry and withdraw the patent challenge. In return for staying out of the market, the generic firm receives a payment, and/or an authorized licensed entry at a later date, but before the patent expiration. We examine why such deals are stable when there are multiple potential entrants.

When to haggle, when to hold firm? Lessons from the used‐car retail market

Guofang Huang
Though haggling has been the conventional way for auto retailers to sell cars, the last two decades have witnessed the systematic adoption of no‐haggle prices by many large dealerships, including the largest new‐ and used‐car dealership chains. This paper develops a structural empirical model to estimate sellers' profits under posted price and haggling, and investigates how market conditions affect sellers' optimal pricing formats.

Vertical differentiation, product innovation, and dynamic competition

David P. Baron
This paper presents an infinite horizon dynamic model in which two firms compete in a market vertically differentiated by the qualities of their products and consumers have heterogeneous preferences for quality. Given the product qualities offered, the firms engage in price competition that segments the market.

Common ownership, institutional investors, and welfare

Oz Shy and Rune Stenbacka
This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. We conduct a detailed welfare analysis within which the competition‐softening effects of an increased degree of common ownership is weighted against the associated diversification benefits.