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Product differentiation and welfare in a mixed duopoly with regulated prices: the case of a public and a private hospital

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  • Herr, Annika

Abstract

Hospital markets are often characterised by price regulation and the existence of different ownership types. Using a Hotelling framework, this paper analyses the effect of different objectives of the hospitals on quality, profits, and overall welfare in a price regulated duopoly with symmetric locations. In contrast to other studies on mixed oligopolies, this paper shows that in a duopoly with regulated prices privatisation of the public hospital may increase overall welfare depending on the difference of the hospitals' marginal costs and the weight of the additional public hospital's motive. --

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Bibliographic Info

Paper provided by Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW) in its series IWQW Discussion Paper Series with number 08/2009.

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Date of creation: 2009
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Handle: RePEc:zbw:iwqwdp:082009

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Web page: http://www.iwqw.rw.uni-erlangen.de/
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Keywords: mixed oligopoly; price regulation; quality; hospital competition;

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References

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  1. Martin Gaynor & William B Vogt, 2003. "Competition among Hospitals," The Centre for Market and Public Organisation 03/087, Department of Economics, University of Bristol, UK.
  2. Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002. "Quality and location choices under price regulation," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-28, Social Science Research Center Berlin (WZB).
  3. Nishimori, Akira & Ogawa, Hikaru, 2002. "Public Monopoly, Mixed Oligopoly and Productive Efficiency," Australian Economic Papers, Wiley Blackwell, vol. 41(2), pages 185-90, June.
  4. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP -385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Toshihiro Matsumura & Noriaki Matsushima, 2004. "Endogenous Cost Differentials between Public and Private Enterprises: A Mixed Duopoly Approach," Economica, London School of Economics and Political Science, vol. 71(284), pages 671-688, November.
  6. Ishida, Junichiro & Matsushima, Noriaki, 2009. "Should civil servants be restricted in wage bargaining? A mixed-duopoly approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 634-646, April.
  7. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2008. "Hospital competition and quality with regulated prices," NIPE Working Papers 06/2008, NIPE - Universidade do Minho.
  8. Cremer, H. & Marchand, M. & Thisse, J.-F., 1987. "The public firm as an instrument for regulating an oligopolistic market," CORE Discussion Papers 1987010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  18. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
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  20. Steinberg, Richard & Weisbrod, Burton A., 2005. "Nonprofits with distributional objectives: price discrimination and corner solutions," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2205-2230, December.
  21. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-98, April.
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  25. 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.
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Citations

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Cited by:
  1. Johan Willner, 2010. "Public Options and Altruistic Firms - Antitrust Targets or Tools? The Welfare Impact of a Mixed Oligopoly With Managerial firms," Discussion Papers 59, Aboa Centre for Economics.
  2. Johan Willner, 2013. "The welfare impact of a managerial oligopoly with an altruistic firm," Journal of Economics, Springer, vol. 109(2), pages 97-115, June.
  3. Bardey, David & Canta, Chiara & Lozachmeur, Jean-Marie, 2012. "The regulation of health care providers’ payments when horizontal and vertical differentiation matter," Journal of Health Economics, Elsevier, vol. 31(5), pages 691-704.

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