Extensive empirical literature has examined the impact of competition on hospital behaviors; however, findings were inconclusive. One of the major reasons concerns the measure of competition, primarily resulting from market area definitions and the competition indicator selection. This study reviews the conceptual and methodological evolution of market area definitions, development of competition indicators, and their empirical applications. In conclusion, hospital market areas should be defined according to particular research issues. Static competition indicators, such as the number of hospitals or the Herfindahl-Hirschman Index (HHI) have been commonly employed in previous studies. The appropriateness of these indicators should be considered, especially for studies examining the impact of competition on hospital behaviors.