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Ownership and Quality in Markets with Asymmetric Information: Evidence from Nursing Homes

  • Ben-Ner Avner


    (University of Minnesota - Twin Cities)

  • Karaca-Mandic Pinar


    (University of Minnesota - Twin Cities)

  • Ren Ting


    (Peking University)

The ownership and governance of for-profit (FP), nonprofit (NP), and local government (LG) organizations are different. Therefore, the objectives of these different types of organizations and their performance may differ. We conjecture that in markets where there is substantial asymmetric information between providers and customers, FP firms, LG organizations and NP organizations provide similar levels of quality attributes that are observable to their customers and are well understood by them. However, FP firms are likely to provide lower levels of less-well observed and less-well understood desirable but costly quality attributes than their NP and LG counterparts. Using a rich dataset, we study the quality of outcomes for Minnesota nursing homes, which do not compete on prices. We find support for our theoretical conjectures: FP homes provide lower quality on a number of dimensions, especially those that are less observable by nursing home residents and their families.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 12 (2012)
Issue (Month): 1 (October)
Pages: 1-33

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Handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:42
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