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Public and Private Firms Competition in a Vertical Differentiation Setting – The Case of Healthcare Industry

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Author Info

  • Cristina Barbot

    ()
    (CETE, Faculdade de Economia, Universidade do Porto)

  • António Brandão

    ()
    (CETE, Faculdade de Economia, Universidade do Porto)

Abstract

With the recent wave of privatisation and liberalisation the number of state owned firms has remarkably decreased. In some industries, namely in healthcare and education, and in many countries, they go on playing an important role, alone or competing with private ones. In this paper we use a model of vertical differentiation to study the effects of the presence of public firms on the quality of healthcare and on welfare. We conclude that, when the market is covered, there must be at least one public firm so that equilibrium welfare may be positive. When the market is not covered, we show that a public monopoly is socially better than a private one, but the only possible competition is between private firms.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0507.

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Length: 22 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:por:cetedp:0507

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Keywords: public firms; competition; health;

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