This paper provides an empirical investigation of how firms with cost advantages (cost disadvantages) exploit (cope with) their advantages (disadvantages) through their pricing behavior. Guided by microeconomic theory and insights from the industrial organization literature, we develop testable...

Recent attention has been given to the hypothesis that local hospital competition takes the form of costly duplication of specialized services -- the "medical arms race." This contrasts with the hypothesis that the supply of specialized services is determined solely by "the extent of the...