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Exclusionary Equilibria in Health-Care Markets

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  • Esther Gal-Or

Abstract

We have demonstrated that when providers of health insurance are perceived to be differentiated by consumers, circumstances may arise under which they find it advantageous to restrict the set of health-care providers that they approve to their customers. Even if all health-care providers are equally qualified and efficient, payers may choose to contract with a selected subset of them in order to secure more favorable contract terms. Moreover, in a concentrated health-care market that consists of two health insurance companies (payers) and two health-care providers (hospitals), both payers may choose to contract with only one of the hospitals while excluding the other completely from the market. When consumers' valuation of an extended choice of providers is small in comparison with the extent of differentiation that exists between the payers, such an exclusionary outcome is the unique equilibrium of the game. Copyright (c) 1997 Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 6 (1997)
Issue (Month): 1 (03)
Pages: 5-43

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Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:5-43

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Bardey, D. & Bommier, A. & Jullien, B., 2010. "Retail price regulation and innovation: Reference pricing in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 29(2), pages 303-316, March.
  2. Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
  3. Martin Gaynor & Deborah Haas-Wilson, . "Change, Consolidation, and Competition in Health Care Markets," GSIA Working Papers 1999-E31, Carnegie Mellon University, Tepper School of Business.
  4. Bourgeon, Jean-Marc & Picard, Pierre & Pouyet, Jerome, 2008. "Providers' affiliation, insurance and collusion," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 170-186, January.
  5. Luigi Siciliani & Anderson Stanciole, 2013. "Bargaining and the provision of health services," The European Journal of Health Economics, Springer, vol. 14(3), pages 391-406, June.
  6. David Bardey & Jean-Charles Rochet, 2009. "Competition among health plans: a two-sided market approach," DOCUMENTOS DE TRABAJO 005217, UNIVERSIDAD DEL ROSARIO.
  7. Martin Gaynor & Robert J Town, 2012. "Competition in Health Care Markets," The Centre for Market and Public Organisation 12/282, Department of Economics, University of Bristol, UK.
  8. repec:mop:credwp:04.05.45 is not listed on IDEAS
  9. Robert Somogyi, 2013. "Bertrand-Edgeworth competition with substantial product differentiation," IEHAS Discussion Papers 1332, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  10. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc.
  11. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September.
  12. Ariel Pakes, 2008. "Theory and Empirical Work on Imperfectly Competitive Markets," NBER Working Papers 14117, National Bureau of Economic Research, Inc.
  13. Martin Gaynor & Kate Ho & Robert Town, 2014. "The Industrial Organization of Health Care Markets," NBER Working Papers 19800, National Bureau of Economic Research, Inc.
  14. Baranes, E. & Bardey, D., 2004. "Competition in Health Care Markets and Vertical Restraints," Cahiers du LASER (LASER Working Papers) 2004.13, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1.

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