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Hospital Competition and Quality with Regulated Prices

  • Kurt R. Brekke
  • Luigi Siciliani
  • Odd Rune Straume

We analyse the effect of competition on quality in hospital markets with regulated prices, considering both the effect of (i) introducing competition (monopoly versus competition) and (ii) increasing competition through lower transportation costs (increased substitutability) or a higher number of hospitals. With semi-altruistic providers and a fairly general cost structure, we show that the relationship between competition and quality is generally ambiguous. In contrast to the received theoretical literature, this is consistent with, and potentially explains, the mixed empirical evidence.

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File URL: http://hdl.handle.net/10.1111/j.1467-9442.2011.01647.x
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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 113 (2011)
Issue (Month): (06)
Pages: 444-469

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Handle: RePEc:bla:scandj:v:113:y:2011:i::p:444-469
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  23. Billy Jack, 2001. "Purchasing Health Care Services from Providers with Unknown Altruism," Working Papers gueconwpa~03-03-13, Georgetown University, Department of Economics.
  24. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
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  26. Asher Wolinsky, 1994. "Regulation of Duopoly: Managed Competition vs. Regulated Monopolies," Discussion Papers 1116, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  27. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
  28. Hirth, Richard A., 1999. "Consumer information and competition between nonprofit and for-profit nursing homes," Journal of Health Economics, Elsevier, vol. 18(2), pages 219-240, April.
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