Ricerc@Sapienza

Many markets of modern economies are segmented by product variety or customer type. Such market segments may arise for many reasons, but perhaps the most common segmentation dimension is quality. Quality submarkets emerge due to factors on the demand and the supply side. On the demand side, there typically are differences in the ability or willingness to pay for product quality, as it can be the case in the provision of health services. On the supply side, there are commonly differences in costs associated with producing different quality varieties. The presence of quality segments naturally affects firms¿ strategies and in particular also their pricing choices.
In this project we aim to study the incentives of firms operating in quality-segmented markets to coordinate their quantities and prices as well as, when profitable, even merging in larger units.
Specifically, through the construction of a theoretical model and testing it econometrically using appropriately defined data sets on European hospitals, we intend to address questions such as: In what segments (say high, medium, low) of a given market (as for instance that of health services) is the incentive to collude or to merge stronger? How does this depend on demand and supply conditions? What would be the major effects of industry-wide or partial mergers in terms of quantities, offered services as well as social welfare?