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Imperfect information in a quality-competitive hospital market

  • Gravelle, Hugh
  • Sivey, Peter

We examine the implications of policies to improve information about the qualities of profit-seeking duopoly hospitals which face the same regulated price and compete on quality. We show that if hospital costs of quality are similar then better information increases the quality of both hospitals. However, if the costs are sufficiently different improved information will reduce the quality of both hospitals. Moreover, even when quality increases, better information may increase or decrease patient welfare depending on whether an ex post or ex ante view of welfare is taken.

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File URL: http://www.sciencedirect.com/science/article/B6V8K-5057KM4-1/2/554aaafaaac7dda37f836c184f085b2a
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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 29 (2010)
Issue (Month): 4 (July)
Pages: 524-535

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Handle: RePEc:eee:jhecon:v:29:y:2010:i:4:p:524-535
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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  1. Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002. "Quality and location choices under price regulation," Working Papers in Economics 24/02, University of Bergen, Department of Economics.
  2. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, vol. 63(6), pages 1281-1301, November.
  3. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  4. Hugh Gravelle & Peter Sivey, 2009. "Imperfect Quality Information in a Quality-Competitive Hospital Market," Melbourne Institute Working Paper Series wp2009n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  5. Cutler, David & Landrum, Mary Beth & Huckman, Robert, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," Scholarly Articles 2640582, Harvard University Department of Economics.
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  7. David Dranove & Mark A. Satterthwaite, 1992. "Monopolistic Competition When Price and Quality are Imperfectly Observable," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 518-534, Winter.
  8. Jin, Ginger Zhe & Sorensen, Alan T., 2006. "Information and consumer choice: The value of publicized health plan ratings," Journal of Health Economics, Elsevier, vol. 25(2), pages 248-275, March.
  9. Hugh Gravelle & Giuliano Masiero, . "Quality incentives in a regulated market with imperfect information and switching costs: capitation in general practice," Discussion Papers 00/18, Department of Economics, University of York.
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  11. Steve Salop, 1976. "Information and monopolistic competition," Special Studies Papers 74, Board of Governors of the Federal Reserve System (U.S.).
  12. Salop, Steven, 1976. "Information and Monopolistic Competition," American Economic Review, American Economic Association, vol. 66(2), pages 240-45, May.
  13. David M. Cutler & Robert S. Huckman & Mary Beth Landrum, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," NBER Working Papers 10489, National Bureau of Economic Research, Inc.
  14. Wolinsky, Asher, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 493-511, August.
  15. Pope, Devin G., 2009. "Reacting to rankings: Evidence from "America's Best Hospitals"," Journal of Health Economics, Elsevier, vol. 28(6), pages 1154-1165, December.
  16. Vrangb K, Karsten & Stergren, Katarina, 2006. "Patient empowerment and the introduction of hospital choice in Denmark and Norway," Health Economics, Policy and Law, Cambridge University Press, vol. 1(04), pages 371-394, October.
  17. Schwartz, Alan & Wilde, Louis L, 1985. "Product Quality and Imperfect Information," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 251-62, April.
  18. Mauro Laudicella & Kim Rosen Olsen & Andrew Street, 2009. "What explains variation in the costs of treating patients in English obstetrics specialties?," Working Papers 049cherp, Centre for Health Economics, University of York.
  19. Marcello Montefiori, 2005. "Spatial competition for quality in the market for hospital care," The European Journal of Health Economics, Springer, vol. 6(2), pages 131-135, June.
  20. Chan, Yuk-Shee & Leland, Hayne, 1982. "Prices and Qualities in Markets with Costly Information," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 499-516, October.
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