Matthew R. Grennan
Kaufman Management Center
44 West 4th St.
New York, NY 10012
Welcome to my website
I am a 5th year student in the Strategy/Economics Ph.D. program at New York University's Stern School of Business.
I am on the 2009-10 job market.
My dissertation research is about bargaining between buyers and suppliers in the medical device industry.
In markets where buyers and suppliers negotiate prices, supplier costs, buyer willingness-to-pay, and competition (forces strategists often refer to as sources of bargaining power) determine only a range of potential prices, leaving the final price dependent on other factors (e.g. negotiating skill), which I call bargaining ability. I use a model of buyer demand and buyer-supplier bargaining, combined with detailed data on prices and quantities at the buyer-supplier relationship level, to estimate firm bargaining abilities in the context of the coronary stent industry.
In this industry different hospitals pay different prices for the exact same product. I estimate that variation in bargaining abilities explains 71% of this price variation. Bargaining ability also has a significant impact on firm profitability. A 20% increase in bargaining ability translates into an average increase in profits of 6% for hospitals and 11% for manufacturers.
I use the estimated model to simulate a policy change proposed in the U.S. Senate that could force each product to be sold at the same price to all hospitals. Contrary to the stated intentions of policy makers, my baseline estimates suggest that implementing this policy would increase average prices by 9%, making 87% of hospitals worse off and decreasing total surplus by 0.06%. Device manufacturers, however, would see their profits increase by an average of 16%.
Price Discrimination and Negotiated Prices (work in progress)
Who benefits from discriminatory versus uniform pricing when suppliers are an oligopoly depends on the nature of demand in the different markets. However, when the different markets are individuals versus groups of individuals, price discrimination in particular may lead to negotiated prices, also changing the nature of buyer market power. I investigate the direction and magnitude of these effects in the context of medical device sales to hospitals using a structural empirical model of competition and bargaining. I find that the size of the total surplus created and how it is split among buyers and suppliers depends critically upon the relative bargaining powers of the two sides of the market in the different pricing regimes and upon whether negotiations are over price or price and quantity.