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Selection Effects in Regulated Markets

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Author Info
Maarten C.W. Janssen ()
Alexei Parakhonyak ()
Abstract

This paper analyzes dynamic selection effects that arise in a regulated market where price structures are determined by a regulator or central management. Consumers come in different types where each type requires a different service or treatment. We show that for a large class of price structures some group of customers is refused the service. Equilibria with selection are welfare inferior to equilibria without selection. We also characterize the class of price structures for which selection does not arise. As the number of customers increases or agents become more patient the class of selection-free price structures shrinks and in the limit it is unique. Moreover, all other price structures induce selection. The general model can be applied to a variety of markets, including health care and taxi markets.

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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0810.

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Date of creation: Jul 2008
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Handle: RePEc:vie:viennp:0810

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Web page: http://www.univie.ac.at/vwl

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies

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  1. Cairns, Robert D. & Liston-Heyes, Catherine, 1996. "Competition and regulation in the taxi industry," Journal of Public Economics, Elsevier, vol. 59(1), pages 1-15, January. [Downloadable!] (restricted)
  2. Wright, Donald J., 2007. "Specialist payment schemes and patient selection in private and public hospitals," Journal of Health Economics, Elsevier, vol. 26(5), pages 1014-1026, September. [Downloadable!] (restricted)
  3. Beesley, Michael E, 1973. "Regulation of Taxis," Economic Journal, Royal Economic Society, vol. 83(329), pages 150-72, March. [Downloadable!] (restricted)
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This page was last updated on 2009-12-2.

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