Leemore Dafny

Assistant Professor of Management and Strategy
Kellogg School of Management
Faculty Asssociate, Institute for Policy Research
Northwestern University
Ph.D., Economics, Massachusetts Institute of
Technology, 2001
l-dafny@kellogg.northwestern.edu
Curriculum Vitae

Leemore Dafny is assistant professor of management and strategy at Northwestern's Kellogg School of Management. Trained as an economist, Dafny uses econometric methods to investigate the impact of public health insurance on healthcare costs and expenditures and to study competition in healthcare markets. Using nationwide data on Medicare beneficiaries, Dafny has examined the impact of Medicare pricing on the quantity and quality of inpatient admissions. She has also explored the strategic behavior of hospitals in surgical fields, finding evidence that hospitals may acquire additional experience in certain surgeries in order to deter entry by other providers. Currently, Dafny is investigating the effects of quality reporting on the Medicare HMO market, as well as exploring the impacts of hospital mergers on inpatient prices. Dafny is also a Faculty Research Fellow of the National Bureau of Economic Research in Cambridge, Mass.

Current Projects

Estimation and Identification of Merger Effects: An Application to Hospital
Mergers. Advances in structural demand estimation have substantially improved economists' ability to forecast the impact of mergers. However, these models rely on extensive assumptions about consumer choice and firm objectives, and ultimately, observational methods are needed to test their validity. Observational studies, in turn, suffer from selection problems arising from the fact that merging entities differ from non-merging entities in unobserved ways.

To obtain an accurate estimate of the ex-post effect of consummated mergers, Dafny proposes a combination of rival analysis and instrumental variables. By focusing on the effect of merger on the behavior of rival firms and instrumenting for these mergers, unbiased estimates of the effect of merger on market outcomes can be obtained. Using this methodology, she evaluates the impact of all independent hospital mergers between 1989 and 1996 on rivals' prices. She finds sharp increases in rival prices following a merger, with the greatest effect on the closest rivals. The results for this industry are more consistent with predictions from structural models than with prior observational estimates.

Do Report Cards Tell Consumers Anything They Don't Already Know? The Case of Medicare HMOs. The use of government-mandated report cards to diminish uncertainty about the quality of various products and services is widespread. However, report cards will have little effect if they simply confirm consumers' prior beliefs. Moreover, documented "responses" to report cards may reflect learning about quality that would have occurred in their absence. Using panel data on Medicare HMO market share between 1994 and 2002, Dafny with David Dranove, Walter McNerney Distinguished Professor of Health Industry Management at Kellogg, examine the relationship between enrollment and quality both before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. They find evidence for both market-based and report-card-induced learning. They estimate the report-card effect on enrollment in the two years following their release to be approximately equal to that of cumulative market learning between 1994 and 2002. The report-card effect is entirely due to beneficiaries' response to consumer satisfaction scores. Other reported quality measures such as the mammography rate did not affect enrollment.