Ecplain this seemingly counter intuitive behavior of price

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Due to competition among firms, markets that have more firms usually have lower prices. However a study by two economists in 92 metropolitan markets in the United States found a different result for the pricing of the service of the primary care physicians. After controlling for demographic and other market and cost factors that might affect the average price of a patient's visit to a primary care doctor, these prominent health economists found that an increase in the number of primary care physicians per square mile (a measure of the number of primary care physicians in the local market) was associated with an increase in the average price per office visit. In other words, markets with more firms also had higher prices.

Can you explain this seemingly counter intuitive behavior of price? Try to focus on the behavior of the consumers. It may be interesting to note that the same study found that the prices were higher in markets where a large proportion of the population had recently moved than in the markets where households were more settled.

Reference no: EM13770249

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