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Quality discrimination in healthcare markets

Author

Listed:
  • Rosa-Branca Esteves

    (NIPE/Center for Research in Economics and Management, University of Minho, Portugal)

  • Ziad Ghandour

    (NIPE/Center for Research in Economics and Management, University of Minho, Portugal)

  • Odd Rune Straume

    (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and Department of Economics, University of Bergen, Norway)

Abstract

Recent advances in healthcare information technologies allow healthcare providers to more accurately track patient characteristics and predict the future treatment costs of previously treated patients, which increases the scope for providers to quality discriminate across different patient types. We theoretically analyse the potential implications of such quality discrimination in a duopoly setting with profit-maximising hospitals, fixed prices and heterogeneous patients. Our analysis shows that the ability to quality discriminate tends to intensify competition and lead to higher quality provision, which benefits patients but makes the hospitals less profitable. Nevertheless, the effect on social welfare is a priori ambiguous, since quality discrimination also leads to an inefficient allocation of patients across hospitals.

Suggested Citation

  • Rosa-Branca Esteves & Ziad Ghandour & Odd Rune Straume, 2022. "Quality discrimination in healthcare markets," NIPE Working Papers 7/2022, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:7/2022
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    File URL: http://repositorium.sdum.uminho.pt/handle/1822/79916
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    Cited by:

    1. Emanuele Bacchiega & Elias Carroni & Alessandro Fedele, 2023. "Monopolistic Duopoly," BEMPS - Bozen Economics & Management Paper Series BEMPS101, Faculty of Economics and Management at the Free University of Bozen.

    More about this item

    Keywords

    Quality discrimination; Hospital competition; Patient heterogeneity;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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