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Bargaining and the provision of health services

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  • Luigi Siciliani

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  • Anderson Stanciole

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Abstract

We model and compare the bargaining process between a purchaser of health services, such as a health authority, and a provider (the hospital) in three plausible scenarios: (a) activity bargaining: the purchaser sets the price and activity (number of patients treated) is bargained between the purchaser and the provider; (b) price bargaining: the price is bargained between the purchaser and the provider, but activity is chosen unilaterally by the provider; (c) efficient bargaining: price and activity are simultaneously bargained between the purchaser and the provider. We show that: (1) if the bargaining power of the purchaser is high (low), efficient bargaining leads to higher (lower) activity and purchaser’s utility, and lower (higher) prices and provider’s utility compared to price bargaining. (2) In activity bargaining, prices are lowest, the purchaser’s utility is highest and the provider’s utility is lowest; activity is generally lowest, but higher than in price bargaining for high bargaining power of the purchaser. (3) If the purchaser has higher bargaining power, this reduces prices and activity in price bargaining, it reduces prices but increases activity in activity bargaining, and it reduces prices but has no effect on activity in efficient bargaining. Copyright Springer-Verlag 2013

Suggested Citation

  • Luigi Siciliani & Anderson Stanciole, 2013. "Bargaining and the provision of health services," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(3), pages 391-406, June.
  • Handle: RePEc:spr:eujhec:v:14:y:2013:i:3:p:391-406
    DOI: 10.1007/s10198-012-0383-x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eleonora Fichera & Hugh Gravelle & Mario Pezzino & Matt Sutton, 2013. "Choice of contracts for quality in health care: Evidence from the British NHS," Working Papers 085cherp, Centre for Health Economics, University of York.
    2. Hange, Ulrich, 2015. "The Market for Nursing Homes in Germany: a spatial competition approach," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112853, Verein für Socialpolitik / German Economic Association.
    3. repec:spr:hecrev:v:7:y:2017:i:1:d:10.1186_s13561-017-0156-4 is not listed on IDEAS
    4. Eleonora Fichera & Hugh Gravelle & Mario Pezzino & Matt Sutton, 2016. "Quality target negotiation in health care: evidence from the English NHS," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(7), pages 811-822, September.
    5. Eleonora Fichera & Hugh Gravelle & Mario Pezzino & Matt Sutton, 2012. "Specification of financial incentives for quality in health care contracts," The School of Economics Discussion Paper Series 1218, Economics, The University of Manchester.
    6. ., 2012. "Models of Negotiation and Bargaining in Health Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 21 Edward Elgar Publishing.

    More about this item

    Keywords

    Bargaining; Negotiation; Purchasing; I11;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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