Mark Satterthwaite honored with lifetime achievement award
By Alicia Webb and photos courtesy of William Greenblatt
Mark Satterthwaite, A.C. Buehler Professor in Hospital and Health Services Management, professor of strategy, and professor of managerial economics emeritus, was honored this summer by the American Society of Health Economists with the Victor R. Fuchs Award for Lifetime Contributions to the Field of Health Economics. In addition to his work at Kellogg, he is also a professor of economics at the Weinberg College of Arts and Sciences.
“It’s a newer award, so there’s only a short list of those who have received it — 11 people before me. I was honored, pleased and very surprised that the committee thought I was worthwhile,” says Satterthwaite. “By and large, you don’t get much feedback in this profession, so it’s really touching to receive such positive and encouraging feedback.”
Professor Satterthwaite joined Kellogg in 1972 as an assistant professor and was promoted to professor in 1978. He has taught a variety of courses including “Microeconomic Analysis” and “Industrial Structure and Competitive Strategy.” He has also served as associate dean for academic affairs and as chair of both the managerial economics & decision sciences department and the strategy department.
“I was not the only one inspired by Mark’s early work, and I think I know why these papers—his 1981 Bell Journal of Economics theory paper and his companion empirical piece with Mark Pauly — made such an impact,” explains colleague turned lifelong friend David Dranove, the Walter McNerney Distinguished Professor of Health Industry Management at Kellogg. “It is as if Mark was saying to a generation of young health economists: ‘Do not abandon economic principles.’ Mark showed us how to use models of optimizing agents in market equilibria while incorporating important institutional details that were perhaps missing in textbook economics.”
He is a microeconomic theorist with a great interest in how healthcare markets work. Within health economics his passion lies in how consumer information affects price competition among both physicians and hospitals. “My interest in health began as a grad student at UW-Madison when a group of Black Milwaukee physicians and I wrote a grant application to fund a neighborhood health center for their underserved community. This cemented my interest in health and began a career in which uncovering and understanding problems that plague healthcare and its pricing has been a major theme,” says Satterthwaite.
His first paper on healthcare focused on a counterintuitive observation concerning pricing. “In the 1970s primary care physicians, who practiced in communities with a small number of competitors, priced their services lower than those in communities with a larger number of competitors,” explains Satterthwaite. “At the time, a popular informal explanation for this was that physicians had a subjective ‘target income.’ The idea was that each physician took his target, divided it by the number of patients in his or her practice, and used the resulting target per patient as the basis for setting their prices. This explanation made no sense to me — no economic actor is completely unconstrained in his or her pricing.”
Satterthwaite proposed an alternative explanation in which consumers choose their physicians on the basis of reputation. “In a community with only a few physicians, consumers can easily keep track of what they hear — and know — about each physician. This allows consumers to favor those physicians whose fees are lower,” says Satterthwaite. “This competitive process; however, is weaker in communities with a larger number of primary care physicians because consumers cannot as easily keep track of what they hear about each individual physician and thus cannot favor lower priced ones as effectively. In a subsequent paper Mark Pauly and I provided empirical evidence that is consistent with my theoretical explanation. And here we are, many years later.”
Among his many accomplishments, Professor Satterthwaite’s work has been published in leading journals including Econometrica, Journal of Political Economy, Review of Economic Studies, Journal of Economic Theory, Rand Journal of Economics. and Games and Economic Behavior.
Satterthwaite is an elected fellow of both the Econometric Society and the American Academy of Arts and Sciences. He is also a founding member of the Game Theory Society.