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Competition and consumer choice in option demand markets

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  • Sorek, Gilad

Abstract

Two medical providers choose their geographic location and medical-care specialization, and then compete in prices under health insurance sales. When buying insurance consumers know their geographic address, but they do not know their preferred medical treatment before getting sick. Hence, consumers may desire buying access-options for both providers, although eventually attending only one. I show that location and product choices in such option demand markets greatly differ from those obtained for corresponding spot markets and may yields efficient, excessive, or insufficient level of consumer choice in terms of product differentiation and geographic dispersion.

Suggested Citation

  • Sorek, Gilad, 2016. "Competition and consumer choice in option demand markets," Economics Letters, Elsevier, vol. 146(C), pages 13-16.
    • Handle: RePEc:eee:ecolet:v:146:y:2016:i:c:p:13-16
    DOI: 10.1016/j.econlet.2016.07.013
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    More about this item

    Keywords

    Consumer choice; Option demand; Medical care; Spatial competition;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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