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Mixing Private and Public Service Providers and Specialization

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  • Hans Gersbach
  • Maija Halonen-Akatwijuka

Abstract

We analyze the reform of public sector welfare services such as education. In this paper we compare a mix of private and a public service provider with full privatization. In both cases the suppliers specialize in serving particular customer types. In the mixed institution the government sets the public fee such that service quality does not deteriorate and the price of the private supplier is anchored at comparatively low level. Under full privatization, however, prices escalate to the highest possible level. As a consequence, consumer welfare is higher with a mixed institution – unless the proportion of low-cost customers is high. The mixed institution can also accommodate wealth constraints of customers to some extent.

Suggested Citation

  • Hans Gersbach & Maija Halonen-Akatwijuka, 2005. "Mixing Private and Public Service Providers and Specialization," The Centre for Market and Public Organisation 05/131, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:05/131
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp131.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Maija Halonen-Akatwijuka & Carol Propper, 2012. "Competition, Equity and Quality in Health Care," The Centre for Market and Public Organisation 12/296, The Centre for Market and Public Organisation, University of Bristol, UK.

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    More about this item

    Keywords

    private and public suppliers; specialization; welfare services; mixed institutions;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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