Countervailing Market Power and Consumer Surplus: An Empirical Examination

Abstract

A current debate in antitrusts analyzes whether to allow horizontal agreements that counteract large imbalances of power in vertical negotiations. We leverage detailed data to empirically assess the consequences for patients of a recent case in which a group of physicians in Chile formed a trade association to improve their bargaining position with insurers. As a result of this agreement, out-of-pocket costs increased by 160 percent. Overall, we find large decreases in consumer surplus.