Price Discrimination and Bargaining: Empirical Evidence from Medical Devices

Abstract

Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict different prices to different buyers are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (1) more uniform pricing works against hospitals by softening competition; and (2) results depend ultimately on a previously unexplored bargaining effect.