Product Choice Under Price Regulation: Evidence from the Out-Patient Dialysis Market

Abstract

Using a dataset of dialysis facilities operating in more than 1,000 U.S. counties in 2007, I examine the product choice of two types of firms: multiproduct dialysis facilities and single product dialysis facilities. I simulate the effect of a Medicare policy proposal in 2008 which reduces the regulated price of a common product that is produced by both types. I find that the policy decreases the number of single product dialysis facilities but increases the number of multiproduct facilities. I also find strong evidence for market segmentation between single product and multiproduct dialysis facilities.