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What Do We Know About Competition and Quality in Health Care Markets?

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Author Info
Martin Gaynor

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Abstract

The goal of this paper is to identify key issues concerning the nature of competition in health care markets and its impacts on quality and social welfare and to identify pertinent findings from the theoretical and empirical literature on this topic. The theoretical literature in economics on competition and quality, the theoretical literature in health economics on this topic, and the empirical findings on competition and quality in health care markets are surveyed and their findings assessed. Theory is clear that competition increases quality and improves consumer welfare when prices are regulated (for prices above marginal cost), although the impacts on social welfare are ambiguous. When firms set both price and quality, both the positive and normative impacts of competition are ambiguous. The body of empirical work in this area is growing rapidly. At present it consists entirely of work on hospital markets. The bulk of the empirical evidence for Medicare patients shows that quality is higher in more competitive markets. The empirical results for privately insured patients are mixed across studies.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12301.

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Date of creation: Jun 2006
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Handle: RePEc:nbr:nberwo:12301

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Find related papers by JEL classification:
I1 - Health, Education, and Welfare - - Health
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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Full references

Cited by:
(explanations, 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.)

  1. Helen Simpson, 2007. "Productivity in Public Services," The Centre for Market and Public Organisation 07/164, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  2. Biorn, Erik & Godager, Geir, 2008. "Does quality influence choice of general practitioner? An analysis of matched doctor-patient panel data," MPRA Paper 8793, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Brekke, Kurt Richard & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and Quality in Regulated Markets: a Differential-Game Approach," CEPR Discussion Papers 6801, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2009. "Price and quality in spatial competition," NIPE Working Papers 21/2009, NIPE - Universidade do Minho. [Downloadable!]
  5. Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. David M. Cutler & Robert S. Huckman & Jonathan T. Kolstad, 2009. "Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery," NBER Working Papers 15214, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Brekke, Kurt Richard & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and quality in regulated markets with sluggish demand," CEPR Discussion Papers 6938, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Deborah Wilson, 2008. "Exit, Voice and Quality in the English Education Sector," The Centre for Market and Public Organisation 08/194, Department of Economics, University of Bristol, UK. [Downloadable!]
  9. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2009. "Hospital Competition and Quality with Regulated Prices," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  10. Christoph Schwierz & Ansgar Wübker, 2009. "Determinants of Avoidable Deaths from Ischaemic Heart Diseases in East and West Germany," Ruhr Economic Papers 0119, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  11. Mark Dusheiko & Maria Goddard & Hugh Gravelle & Rowena Jacobs, 2008. "Explaining trends in concentration of healthcare commissioning in the English NHS," Health Economics, John Wiley & Sons, Ltd., vol. 17(8), pages 907-926. [Downloadable!]
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