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Competition and Quality in Health Care Markets

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  • Gaynor, Martin

Abstract

The goal of this paper is to identify key issues concerning the nature of competition in health care markets and its impacts on quality and social welfare and to identify pertinent findings from the theoretical and empirical literature on this topic. The theoretical literature in economics on competition and quality, the theoretical literature in health economics on this topic, and the empirical findings on competition and quality in health care markets are surveyed and their findings assessed. Theory is clear that competition increases quality and improves consumer welfare when prices are regulated (for prices above marginal cost), although the impacts on social welfare are ambiguous. When firms set both price and quality, both the positive and normative impacts of competition are ambiguous. The body of empirical work in this area is growing rapidly. At present it consists entirely of work on hospital markets. The bulk of the empirical evidence for Medicare patients shows that quality is higher in more competitive markets. The empirical results for privately insured patients are mixed across studies.

Suggested Citation

  • Gaynor, Martin, 2007. "Competition and Quality in Health Care Markets," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(6), pages 441-508, February.
  • Handle: RePEc:now:fntmic:0700000024
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    File URL: http://dx.doi.org/10.1561/0700000024
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    Cited by:

    1. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2011. "Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms," Economic Journal, Royal Economic Society, vol. 121(554), pages 228-260, August.
    2. Nicholas Bloom & Carol Propper & Stephan Seiler & John Van Reenen, 2015. "The Impact of Competition on Management Quality: Evidence from Public Hospitals," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 457-489.
    3. Burgess, Simon & Propper, Carol & Wilson, Deborah, 2005. "Extending Choice In English Health Care: The implications of the economic evidence," CEPR Discussion Papers 5328, C.E.P.R. Discussion Papers.
    4. Cookson, Richard & Laudicella, Mauro & Donni, Paolo Li, 2013. "Does hospital competition harm equity? Evidence from the English National Health Service," Journal of Health Economics, Elsevier, vol. 32(2), pages 410-422.
    5. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2012. "Does Competition Improve Public Hospitals' Efficiency? Evidence from a Quasi-Experiment in the English National Health Service," CEP Discussion Papers dp1125, Centre for Economic Performance, LSE.
    6. Audibert, Martine & Mathonnat, Jacky & Pelissier, Aurore & Huang, Xiao Xian & Ma, Anning, 2013. "Health insurance reform and efficiency of township hospitals in rural China: An analysis from survey data," China Economic Review, Elsevier, vol. 27(C), pages 326-338.
    7. Francesco Longo & Luigi Siciliani & Hugh Gravelle & Rita Santos, 2017. "Do hospitals respond to rivals’ quality and efficiency? a spatial econometrics approach," Working Papers 144cherp, Centre for Health Economics, University of York.
    8. Martin Gaynor & Rodrigo Moreno-Serra & Carol Propper, 2013. "Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 134-166, November.
    9. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    10. Carol Propper, 2005. "Why economics is good for your health. 2004 Royal Economic Society Public Lecture," Health Economics, John Wiley & Sons, Ltd., vol. 14(10), pages 987-997.
    11. Chen, Chi-Chen & Cheng, Shou-Hsia, 2010. "Hospital competition and patient-perceived quality of care: Evidence from a single-payer system in Taiwan," Health Policy, Elsevier, vol. 98(1), pages 65-73, November.
    12. Quimbo, Stella & Peabody, John W. & Javier, Xylee & Shimkhada, Riti & Solon, Orville, 2011. "Pushing on a string: How policy might encourage private doctors to compete with the public sector on the basis of quality," Economics Letters, Elsevier, vol. 110(2), pages 101-103, February.
    13. repec:eee:hepoli:v:121:y:2017:i:12:p:1225-1232 is not listed on IDEAS
    14. Keith Brand & Martin Gaynor & Patrick McAlvanah & David Schmidt & Elizabeth Schneirov, 2014. "Economics at the FTC: Office Supply Retailers Redux, Healthcare Quality Efficiencies Analysis, and Litigation of an Alleged Get-Rich-Quick Scheme," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(4), pages 325-344, December.
    15. Dardanoni, V.; & Laudicella, M.; & Li Donni, P.;, 2018. "Hospital Choice in the NHS," Health, Econometrics and Data Group (HEDG) Working Papers 18/04, HEDG, c/o Department of Economics, University of York.
    16. Dieter Pennerstorfer, 2014. "Price and Quality Competition in Spatial Markets. The Case of Camping Sites," WIFO Working Papers 466, WIFO.
    17. Michiel Bijlsma & Pierre Koning & Victoria Shestalova, 2013. "The Effect of Competition on Process and Outcome Quality of Hospital Care in the Netherlands," De Economist, Springer, vol. 161(2), pages 121-155, June.
    18. Chew Lian Chua & Alfons Palangkaraya & Jongsay Yong, 2011. "Hospital Competition, Technical Efficiency and Quality," The Economic Record, The Economic Society of Australia, vol. 87(277), pages 252-268, June.
    19. Martin, Cécile, 2014. "Concurrence, prix et qualité de la prise en charge en EHPAD en France : Analyses micro-économétriques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13712 edited by Dormont, Brigitte.

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    Keywords

    Antitrust; Competition; Health care markets;

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