The growth of antitrust litigation in the health care area reflects the developing consensus that competition is as powerful a force in health care as it is elsewhere in the economy. Exclusive contracts between hospitals and hospital-based physician specialists have been prominent among the contested practices. Challenges to these arrangements uniformly assert an injury to competition; for example, that the contracts are a means of gaining monopoly power in some market. But these claims have lacked a solid theoretical basis for general hostility to exclusive dealing of this sort. This article describes several economic considerations that are fundamental to an analysis of this contractual phenomenon. These considerations imply that there is no general economic basis for suspicion, and that the circumstances under which suspicion would be warranted are likely to be rare.
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Summer 1984
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