Doctors’ remuneration schemes and hospital competition in two-sided markets with common network externalities
AbstractABSTRACT: This paper uses a two-sided market model of hospital competition to study the implications of different remunerations schemes on the physicians'side. The two-sided market approach is characterized by the concept of common network externality (CNE)introduced by Bardey et al. (2010). This type of externality occurs when occurs when both sides value, possibly with different intensities, the same network externality. We explicitly introduce effort exerted by doctors. By increasing the number of medical acts (which involves a costly effort) the doctor can increase the quality of service offered to patients (over and above the level implied by the CNE). We first consider pure salary,capitation or fee-for-service schemes. Then, we study schemes that mix fee-for-service with either salary or capitation payments. We show that salary schemes (either pure or in combination with fee-for-service) are more patient friendly than (pure or mixed)capitations schemes. This comparison is exactly reversed on the providers'side. Quite surprisingly, patients always loose when a fee-for-service scheme is introduced (pure of mixed). This is true even though the fee-for-service is the only way to induce the providers to exert effort and it holds whatever the patients'valuation of this effort. In other words, the increase in quality brought about by the fee-for-service is more than compensated by the increase in fees faced by patients.
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.
Bibliographic InfoPaper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 008848.
Date of creation: 01 Aug 2011
Date of revision:
Contact details of provider:
Other versions of this item:
- Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2011. "Doctors' remuneration schemes and hospital competition in two-sided markets with common network externalities," IDEI Working Papers 628, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2011.
- Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2011. "Doctors' remuneration schemes and hospital competition in two-sided markets with common network externalities," TSE Working Papers 11-250, Toulouse School of Economics (TSE), revised Jul 2011.
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-COM-2011-08-09 (Industrial Competition)
- NEP-CSE-2011-08-09 (Economics of Strategic Management)
- NEP-HEA-2011-08-09 (Health Economics)
- NEP-NET-2011-08-09 (Network Economics)
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.:
- Mark Armstrong, 2006.
"Competition in two‐sided markets,"
RAND Journal of Economics,
RAND Corporation, vol. 37(3), pages 668-691, 09.
- Armstrong, M., 2006. "Competition in two-sided markets," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
- 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, 2008. "Hospital competition and quality with regulated prices," NIPE Working Papers 06/2008, NIPE - Universidade do Minho.
- Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2009. "Hospital Competition and Quality with Regulated Prices," CESifo Working Paper Series 2635, CESifo Group Munich.
- David M. Cutler & Richard J. Zeckhauser, 1999.
"The Anatomy of Health Insurance,"
NBER Working Papers
7176, National Bureau of Economic Research, Inc.
- 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.
- 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).
- Rochet, Jean-Charles & Tirole, Jean, 2006.
"Two-Sided Markets: A Progress Report,"
Open Access publications from University of Toulouse 1 Capitole
http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Jean-Charles Rochet Author-Email: email@example.com Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: firstname.lastname@example.org Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
- Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
- Gaynor, Martin & Pauly, Mark V, 1990. "Compensation and Productive Efficiency of Partnerships: Evidence from Medical Group Practice," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 544-73, June.
- Bernard Fortin & Nicolas Jacquemet & Bruce Shearer, 2008.
"Policy Analysis in the Health-Services Market: Accounting for Quality and Quantity,"
Cahiers de recherche
- Bernard Fortin & Nicolas Jacquemet & Bruce Shearer, 2008. "Policy Analysis in the health-services market: accounting for quality and quantity," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00305309, HAL.
- Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publicaciones Economía).
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.