[bicknergseng]

I wouldn't bank on free markets fixing emergency room problems. While anecdotally some parents may choose to take their children to one hospital or another, I doubt this is a statistical norm. I imagine most people choose the nearest emergency room for most emergencies, and hold off for an appointment with a doctor otherwise. Sometimes, it's just a baby with colic. But sometimes (increasingly in a country with a serious obesity problem) it's a heart attack, and no one is going to drive their dad 45 minutes to the cheap hospital when the one that will save his life is 10 minutes away. Because of this I don't think hospitals have any incentive to drive down ER costs.

But maybe I'm projecting, since my experience with ERs tends to be "Oh shit... get me to a hospital now Google Maps" rather than "I should Yelp some reviews of hospitals, because I have time."

[mseebach]

Of course it's hard to predict what will happen. But right now, nobody has an incentive to even check, so obviously it doesn't happen.

Some people will live 10 minutes from one ER and 45 from the next. But some will live 25 from one and 30 from another. Or have three within 15 minutes (ie. short enough that they're equidistant for "the baby has colic"). Some will have more time than money and drive 45 minutes if it means saving $20.

But there's another factor in free markets you're not accounting for: new entrants. If an ER charges high rates because they're the only player in the area, someone could set up a competing ER and charge less.

[ryguytilidie]

I love how easy everyone always makes this sound. Yeah, just setup a hospital near the other hospital and make your prices lower. I'm sure they wouldn't respond by lowering costs until I'm driven out of the market and then immediately raise them again.

[cmbaus]

And amazingly we still have businesses that compete and don't price all their competitors out of business. So I don't think this is an obvious conclusion.

[rdw]

The reason that this is so is because of regulations.

[webXL]

Or it could actually have nothing to do with regulations. Something called imperfect competition: very few people want and sell the exact same thing. That makes it very difficult to sell superior products at lower cost.

[anonymoushn]

As far as I can tell it is very difficult to prosecute for predatory pricing in the US. This doesn't particularly matter, since it is an awful idea and almost no businesses would do it anyway.

[rdl]

Actually you are not allowed to set up a hospital near another hospital; you need a "certificate of need". I'm not kidding.

[webXL]

Oh, a CON. Hayek probably had some fun with that.