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Price dispersion in the private health insurance industry: The case of Catalonia

Author

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  • Oliva, M.
  • Carles, M.

Abstract

This paper presents a vertical and horizontal product differentiation model that explains price dispersion among different kinds of health care insurance firms. Our model shows large insurance firms engaging in price competition with small mutual organizations that serve only a local area and charge lower premiums. We found that, although the market allows the entry of an excessive number of firms, the presence of local insurance companies increases social welfare by increasing the range of products available to consumers. Our conclusions are applicable to OECD countries in general although we rely on Catalonia's data.

Suggested Citation

  • Oliva, M. & Carles, M., 2013. "Price dispersion in the private health insurance industry: The case of Catalonia," Economic Modelling, Elsevier, vol. 31(C), pages 177-182.
  • Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:177-182
    DOI: 10.1016/j.econmod.2012.11.029
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    References listed on IDEAS

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    1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    2. Gravelle, Hugh & Masiero, Giuliano, 2000. "Quality incentives in a regulated market with imperfect information and switching costs: capitation in general practice," Journal of Health Economics, Elsevier, vol. 19(6), pages 1067-1088, November.
    3. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    4. Francesca Colombo & Nicole Tapay, 2004. "Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems," OECD Health Working Papers 15, OECD Publishing.
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