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Hospital competition and quality with regulated prices

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Author Info
Kurt R. Brekke () (Department of Economics, Norwegian School of Economics and Business Administration, and Health Economics Bergen)
Luigi Siciliani () (Department of Economics and Related Studies, and Centre for Health Economics, University of York)
Odd Rune Straume () (Universidade do Minho - NIPE)

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Abstract

We analyse the effect of competition on quality in hospital market with regulated prices, considering both the effect of free patient choice (monopoly versus competition) and increased competition through lower transportation costs (increased substitutability). With partially altruistic providers and a convex cost function that is non-separable in activity and quality, we show - in both cases - that the effect is generally ambiguous. In contrast to the received theoretical literature, this is consistent with, and potentially explains, the mixed empirical evidence.

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Publisher Info
Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 06/2008.

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Date of creation: 2008
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Handle: RePEc:nip:nipewp:06/2008

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Related research
Keywords: Hospital; Competition; Quality.;

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Find related papers by JEL classification:
H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
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. Martin Gaynor, 2006. "What Do We Know About Competition and Quality in Health Care Markets?," NBER Working Papers 12301, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January. [Downloadable!] (restricted)
    Other versions:
  3. Ching-to Ma & James Burgess, 1993. "Quality competition, welfare, and regulation," Journal of Economics, Springer, vol. 58(2), pages 153-173, June. [Downloadable!] (restricted)
    Other versions:
  4. Thomas P. Lyon, 1999. "Quality Competition, Insurance, and Consumer Choice in Health Care Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(4), pages 546-580, December. [Downloadable!] (restricted)
  5. Robert Nuscheler, 2003. "Physician Reimbursement, Time-Consistency and the Quality of Care," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(2), pages 302-, June.
  6. Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2007. "Gatekeeping in health care," Journal of Health Economics, Elsevier, vol. 26(1), pages 149-170, January. [Downloadable!] (restricted)
    Other versions:
  7. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May. [Downloadable!] (restricted)
  8. David Dranove & Mark A. Satterthwaite, 1992. "Monopolistic Competition When Price and Quality are Imperfectly Observable," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 518-534, Winter. [Downloadable!] (restricted)
  9. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March. [Downloadable!] (restricted)
  10. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September. [Downloadable!] (restricted)
  11. Matsumura, Toshihiro & Matsushima, Noriaki, 2007. "Congestion-reducing investments and economic welfare in a Hotelling model," Economics Letters, Elsevier, vol. 96(2), pages 161-167, August. [Downloadable!] (restricted)
  12. Karlsson, Martin, 2007. "Quality incentives for GPs in a regulated market," Journal of Health Economics, Elsevier, vol. 26(4), pages 699-720, July. [Downloadable!] (restricted)
  13. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June. [Downloadable!] (restricted)
  14. Propper, Carol & Burgess, Simon & Green, Katherine, 2004. "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1247-1272, July. [Downloadable!] (restricted)
  15. Tay, Abigail, 2003. " Assessing Competition in Hospital Care Markets: The Importance of Accounting for Quality Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 786-814, Winter.
  16. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584. [Downloadable!]
  17. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October. [Downloadable!] (restricted)
  18. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer. [Downloadable!] (restricted)
  19. Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 15(1), pages 207-227, 03. [Downloadable!] (restricted)
  20. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and waiting times in hospital markets," Journal of Public Economics, Elsevier, vol. 92(7), pages 1607-1628, July. [Downloadable!] (restricted)
    Other versions:
  21. Ho, Vivian & Hamilton, Barton H., 2000. "Hospital mergers and acquisitions: does market consolidation harm patients?," Journal of Health Economics, Elsevier, vol. 19(5), pages 767-791, September. [Downloadable!] (restricted)
  22. repec:bep:eapcon:v:4:y:2005:i:1:p:1368-1368 is not listed on IDEAS
  23. Hirth, Richard A., 1999. "Consumer information and competition between nonprofit and for-profit nursing homes," Journal of Health Economics, Elsevier, vol. 18(2), pages 219-240, April. [Downloadable!] (restricted)
  24. Jack, William, 2005. "Purchasing health care services from providers with unknown altruism," Journal of Health Economics, Elsevier, vol. 24(1), pages 73-93, January. [Downloadable!] (restricted)
  25. Beitia, Arantza, 2003. "Hospital quality choice and market structure in a regulated duopoly," Journal of Health Economics, Elsevier, vol. 22(6), pages 1011-1036, November. [Downloadable!] (restricted)
  26. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June. [Downloadable!] (restricted)
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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. Fernando Alexandre & Miguel Portela & Carla Sá, 2008. "Admission conditions and graduates' employability," NIPE Working Papers 16/2008, NIPE - Universidade do Minho. [Downloadable!]
    Other versions:
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