Price Transparency
Unlike most goods markets, prices in healthcare are typically determined through negotiation rather than posted prices, and are often opaque to patients, providers, and even market participants themselves. Recent policy efforts aimed at increasing price transparency seek to reduce this opacity by making prices observable, with the goal of promoting competition and lowering spending. Whether transparency achieves these goals depends critically on how price information enters bargaining, demand, and strategic interaction.
The literature on price transparency emphasizes that disclosure can have ambiguous effects in markets with imperfect competition. Transparency may shift patient demand or referral patterns, but it can also alter bargaining positions, outside options, and negotiated prices between firms. As a result, transparency can intensify competition in some settings while facilitating coordination or redistributing surplus in others. Understanding these effects requires attention to equilibrium responses and institutional detail.
We introduce this literature by focusing on empirical work that studies how price information affects outcomes in bargaining and competitive environments. These papers highlight when transparency improves efficiency and when it may instead change who captures surplus without lowering prices. This class concludes the module by emphasizing transparency as a mechanism that reshapes strategic interaction, rather than as a uniformly pro-competitive policy.
Potential papers for presentation today include:
- Grennan and Swanson (2020) — a canonical analysis of how transparency affects negotiated prices and bargaining power
- Christensen, Floyd, and Maffett (2020) — evidence on price transparency regulation and healthcare prices
- Brown (2019) — equilibrium effects of healthcare price information