Tuesday, August 1, 2017

Bargaining as a Group

Last month, FTC alumni Dan O’Brien and Jon Leibowitz along with Russell Anello, completed a study extolling the virtues of Healthcare Group Purchasing Organizations (GPOs). GPOs bring together multiple firms to buy of common products jointly rather than separately. Among the ways this lowers costs is by lowering their counter-party's disagreement value.
A healthcare provider’s bargaining strength depends in part on the size of the loss it can impose on a vendor by refusing agreement. If a vendor has little to lose from failing to reach an agreement with the provider, then the provider’s bargaining position is weak, while if the vendor has a lot to lose, then the provider’s position is strong.

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