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

Author

Listed:
  • 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.

Suggested Citation

  • Cristina Barbot & António Brandão, 2005. "Public and Private Firms Competition in a Vertical Differentiation Setting – The Case of Healthcare Industry," CEF.UP Working Papers 0507, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:cetedp:0507
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    Cited by:

    1. Rim Lahmandi‐Ayed & Hejer Lasram & Didier Laussel, 2021. "Is partial privatization of universities a solution for higher education?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1174-1198, December.
    2. Rim Lahmandi-Ayed & Hejer Lasram & Didier Laussel, 2020. "Is partial privatization of universities a solution for higher education? A successive monopolies model," Working Papers hal-02988323, HAL.

    More about this item

    Keywords

    public firms; competition; health;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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