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Competition in Health Care Markets and Vertical Restraints

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Author Info
Baranes, E.
Bardey, D.

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Abstract

This paper studies competition between Managed Care Organizations (MCOs) and Conventional Insurers. Most of the time, MCOs sign exclusive contracts with providers and these vertical restrictions associated to differentiation in the providers’ market imply a risk segmentation. Taking into account this phenomenon, we show that vertical restrictions in the health insurance sector can paradoxically create an anti-raise rivals’ cost effect in which MCOs’ penetration allows to decrease conventional insurers’ premiums.

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File URL: http://www.laser.univ-montp1.fr/Cahiers/cahier130404.pdf
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Publisher Info
Paper provided by LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1 in its series Cahiers du LASER (LASER Working Papers) with number 2004.13.

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Length: 17 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mop:lasrwp:2004.13

Contact details of provider:
Postal: Université de Montpellier 1, Faculté des Sciences Economiques, LASER, Av. de la Mer - Espace Richter, CS 79606, 34960 Montpellier Cedex 2, France
Web page: http://www.laser.univ-montp1.fr
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Related research
Keywords: VERTICAL RESTRAINTS ; MANAGED CARE ; COMPETITION POLICY.;

Other versions of this item:

Find related papers by JEL classification:
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies

References listed on IDEAS
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  1. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September. [Downloadable!] (restricted)
  2. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October. [Downloadable!] (restricted)
  4. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  6. Martin Gaynor & Deborah Haas-Wilson, 1999. "Change, Consolidation, and Competition in Health Care Markets," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 141-164, Winter. [Downloadable!] (restricted)
    Other versions:
  7. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  8. Esther Gal-Or, 1997. "Exclusionary Equilibria in Health-Care Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(1), pages 5-43, 03. [Downloadable!] (restricted)
  9. David M. Cutler & Richard J. Zeckhauser, 1999. "The Anatomy of Health Insurance," NBER Working Papers 7176, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
  11. Ching-To Albert Ma, 1997. "Option Contracts and Vertical Foreclosure," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(4), pages 725-753, December. [Downloadable!] (restricted)
    Other versions:
  12. Esther Gal-Or, 1999. "Mergers and Exclusionary Practices in Health Care Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(3), pages 315-350, 09. [Downloadable!] (restricted)
  13. Brooks, John M. & Dor, Avi & Wong, Herbert S., 1997. "Hospital-insurer bargaining: An empirical investigation of appendectomy pricing," Journal of Health Economics, Elsevier, vol. 16(4), pages 417-434, August. [Downloadable!] (restricted)
  14. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May. [Downloadable!] (restricted)
  15. Baker, Laurence C & Corts, Kenneth S, 1996. "HMO Penetration and the Cost of Health Care: Market Discipline or Market Segmentation?," American Economic Review, American Economic Association, vol. 86(2), pages 389-94, May. [Downloadable!] (restricted)
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