Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital
AbstractHospital markets are often characterised by price regulation and the existence of different ownership types. Using a Hotelling framework, this paper analyses the effect of heterogeneous objectives of the hospitals on quality differentiation, profits, and overall welfare in a price regulated duopoly with exogenous symmetric locations. In contrast to other studies on mixed duopolies, this paper shows that in this framework privatisation of the public hospital may increase overall welfare. This holds if the public hospital is similar to the private hospital or less efficient and competition is low. The main driving force is the single regulated price which induces under-(over-)provision of quality of the more (less) efficient hospital compared to the first-best. However, if the public hospital is sufficiently more efficient and competition is fierce, a mixed duopoly outperforms both a private and a public duopoly due to an equilibrium price below (above) the price of the private (public) duopoly. This medium price discourages overprovision of quality of the less efficient hospital and - together with the non-profit objective - encourages an increase in quality of the more efficient public hospital. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 12 (2011)
Issue (Month): 4 (November)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1465-6485
More information through EDIRC
Other versions of this item:
- Herr, Annika, 2010. "Quality and welfare in a mixed duopoly with regulated prices: The case of a public and a private hospital," DICE Discussion Papers 07, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002.
"Quality and location choices under price regulation,"
Discussion Papers, Research Unit: Market Processes and Governance
FS IV 02-28, Social Science Research Center Berlin (WZB).
- Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, 03.
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002. "Quality and location choices under price regulation," Working Papers in Economics 24/02, University of Bergen, Department of Economics.
- Rexford E. Santerre & John A. Vernon, 2006. "The consumer welfare implications of the hospital ownership mix in the US: an exploratory study," Health Economics, John Wiley & Sons, Ltd., vol. 15(11), pages 1187-1199.
- de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
- White, Mark D., 2002. "Political manipulation of a public firm's objective function," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 487-499, December.
- Martin Gaynor, .
"What Do We Know About Competition and Quality in Health Care Markets?,"
GSIA Working Papers
2006-E62, Carnegie Mellon University, Tepper School of Business.
- Martin Gaynor, 2006. "What Do We know About Competition and Quality in Health Care Markets?," The Centre for Market and Public Organisation 06/151, Department of Economics, University of Bristol, UK.
- Martin Gaynor, 2006. "What Do We Know About Competition and Quality in Health Care Markets?," NBER Working Papers 12301, National Bureau of Economic Research, Inc.
- Bardey, David & Canta, Chiara & Lozachmeur, Jean-Marie, 2010.
"Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter,"
IDEI Working Papers
532, Institut d'Économie Industrielle (IDEI), Toulouse.
- Bardey, David & Canta, Chiara & Lozachmeur, Jean-Marie, 2010. "Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter," TSE Working Papers 10-164, Toulouse School of Economics (TSE).
- Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2009.
"Competition in two-sided markets with common network externalities,"
IDEI Working Papers
578, Institut d'Économie Industrielle (IDEI), Toulouse, revised Oct 2010.
- David Bardey & Helmuth Cremer & Jean-Marie Lozachmeur, 2014. "Competition in Two-Sided Markets with Common Network Externalities," Review of Industrial Organization, Springer, vol. 44(4), pages 327-345, June.
- Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2009. "Competition in two-sided markets with common network externalities," TSE Working Papers 09-103, Toulouse School of Economics (TSE), revised Oct 2010.
- Helmuth Cremer & David Bardey & Jean-Marie Lozachmeur, 2009. "Competition in two-sided markets with common network externalities," DOCUMENTOS DE TRABAJO 005937, UNIVERSIDAD DEL ROSARIO.
- Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2010. "Competition in two-sided markets with common network externalities," Economics Papers from University Paris Dauphine 123456789/5992, Paris Dauphine University.
- Marcello Montefiori, 2005. "Spatial competition for quality in the market for hospital care," The European Journal of Health Economics, Springer, vol. 6(2), pages 131-135, June.
- Sloan, Frank A., 2000. "Not-for-profit ownership and hospital behavior," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 21, pages 1141-1174 Elsevier.
- de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
- Annika Herr & Hendrik Schmitz & Boris Augurzky, 2011. "Profit efficiency and ownership of German hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 660-674, June.
- Toshihiro Matsumura & Noriaki Matsushima, 2004. "Endogenous Cost Differentials between Public and Private Enterprises: A Mixed Duopoly Approach," Economica, London School of Economics and Political Science, vol. 71(284), pages 671-688, November.
- Horwitz, Jill R. & Nichols, Austin, 2009. "Hospital ownership and medical services: Market mix, spillover effects, and nonprofit objectives," Journal of Health Economics, Elsevier, vol. 28(5), pages 924-937, September.
- Annika Herr, 2008. "Cost and technical efficiency of German hospitals: does ownership matter?," Health Economics, John Wiley & Sons, Ltd., vol. 17(9), pages 1057-1071.
- Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2011.
"Hospital Competition and Quality with Regulated Prices,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 113, pages 444-469, 06.
- Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2009. "Hospital Competition and Quality with Regulated Prices," CESifo Working Paper Series 2635, CESifo Group Munich.
- Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2008. "Hospital competition and quality with regulated prices," NIPE Working Papers 06/2008, NIPE - Universidade do Minho.
- Ishida, Junichiro & Matsushima, Noriaki, 2009. "Should civil servants be restricted in wage bargaining? A mixed-duopoly approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 634-646, April.
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"On Hotelling's "Stability in competition","
CORE Discussion Papers RP
-385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Care Finance and Economics, Springer, vol. 4(1), pages 65-89, 03.
- Bester, Helmut & de Palma, Andre & Leininger, Wolfgang & Thomas, Jonathan & von Thadden, Ernst-Ludwig, 1996. "A Noncooperative Analysis of Hotelling's Location Game," Games and Economic Behavior, Elsevier, vol. 12(2), pages 165-186, February.
- Bruce Hollingsworth, 2008. "The measurement of efficiency and productivity of health care delivery," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1107-1128.
- Ellert, Alexander & Urmann, Oliver, 2012. "Competition in the market for supplementary health insurance: The case of competing nonprofit sickness funds," Working Papers on Risk and Insurance 25 [rev.], University of Hamburg, Institute for Risk and Insurance.
- Seungchul Lee & Robert Rosenman, 2012.
"Reimbursement and Investment: Propsective Payment and For-Profit Hospitals' Market Share,"
2012-3, School of Economic Sciences, Washington State University.
- Seungchul Lee & Robert Rosenman, 2013. "Reimbursement and Investment: Prospective Payment and For-Profit Hospitals’ Market Share," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 503-518, December.
- Gu, Yiquan & Wenzel, Tobias, 2012.
"Transparency, entry, and productivity,"
Elsevier, vol. 115(1), pages 7-10.
- Rosella Levaggi & Marcello Montefiori, 2013. "Patient selection in a mixed oligopoly market for health care: the role of the soft budget constraint," International Review of Economics, Springer, vol. 60(1), pages 49-70, March.
- Stühmeier Torben & Wenzel Tobias, 2012.
"Regulating Advertising in the Presence of Public Service Broadcasting,"
Review of Network Economics,
De Gruyter, vol. 11(2), pages 1-23, June.
- Stühmeier, Torben & Wenzel, Tobias, 2012. "Regulating advertising in the presence of public service broadcasting," DICE Discussion Papers 41, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Christin, Clémence, 2011. "Entry deterrence through cooperative R&D over-investment," DICE Discussion Papers 38, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Katz, Michael L., 2013. "Provider competition and healthcare quality: More bang for the buck?," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 612-625.
- Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.