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Why Do Previous Choices Matter for Hospital Demand? Decomposing Switching Costs from Unobserved Preferences

Why Do Previous Choices Matter for Hospital Demand? Decomposing Switching Costs from Unobserved... Using data on women’s choice of hospital for childbirth in Florida, we find that women return to the same hospital approximately 70% of the time. We separate explanations of switching costs and unobserved preference heterogeneity using a panel data fixed effects estimator and find that switching costs account for approximately 40% of the demand effects of a lagged dependent variable. The welfare effects of excluding a hospital from a payer’s network are smaller in the short run but higher in the long run, given our estimates of switching costs, and the dynamic effects of entry on competition are significantly smaller. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economics and Statistics MIT Press

Why Do Previous Choices Matter for Hospital Demand? Decomposing Switching Costs from Unobserved Preferences

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References (19)

Publisher
MIT Press
Copyright
No rights reserved. This work was authored as part of the Contributor’s official duties as an Employee of the United States Government and is therefore a work of the United States Government. In accordance with 17 U.S.C. 105, no copyright protection is available for such works under U.S. law.
ISSN
0034-6535
eISSN
1530-9142
DOI
10.1162/rest_a_00741
Publisher site
See Article on Publisher Site

Abstract

Using data on women’s choice of hospital for childbirth in Florida, we find that women return to the same hospital approximately 70% of the time. We separate explanations of switching costs and unobserved preference heterogeneity using a panel data fixed effects estimator and find that switching costs account for approximately 40% of the demand effects of a lagged dependent variable. The welfare effects of excluding a hospital from a payer’s network are smaller in the short run but higher in the long run, given our estimates of switching costs, and the dynamic effects of entry on competition are significantly smaller.

Journal

The Review of Economics and StatisticsMIT Press

Published: Dec 1, 2018

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