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The competitive nature of the nursing home industry: price mark ups and demand elasticities

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  • Dana Mukamel
  • William Spector

Abstract

Nursing home markets are likely to deviate from a competitive structure because of limitations on entry imposed by Certificate of Need (CON) regulations and the potential for product differentiation along such attributes as location, religious affiliation and quality. This paper investigates the structure of nursing home markets in New York State by calculating price mark ups and residual private pay demand elasticities. It shows that the residual demand elasticity is bound by estimates based on price mark ups above marginal costs and above Medicaid rates. This approach allows estimation of demand elasticities in all markets, whether or not CON regulations constrain bed supply. Mean price elasticities (in absolute value) calculated for nursing homes in New York State in 1991 ranged from 3.46 to 3.85.

Suggested Citation

  • Dana Mukamel & William Spector, 2002. "The competitive nature of the nursing home industry: price mark ups and demand elasticities," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 413-420.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:4:p:413-420
    DOI: 10.1080/00036840110044199
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    Cited by:

    1. Kris Knox & Eric Blankmeyer & J. Stutzman, 2006. "Private-Pay Demand for Nursing Facilities in a Market with Excess Capacity," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(1), pages 75-83, March.
    2. Huang, Sean Shenghsiu & Hirth, Richard A., 2016. "Quality rating and private-prices: Evidence from the nursing home industry," Journal of Health Economics, Elsevier, vol. 50(C), pages 59-70.
    3. Roman Mennicken & Boris Augurzky & Heinz Rothgang & Jürgen Wasem, 2010. "Explaining Differences in Remuneration Rates of Nursing Homes in Germany," Ruhr Economic Papers 0215, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Brendstrup, Bjarne & Paarsch, Harry J. & Solow, John L., 2006. "Estimating market power in the presence of capacity constraints: An application to high-fructose corn sweetener," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 251-267, March.
    5. Bilotkach, Volodymyr & Braakmann, Nils & Gonzalo-Almorox, Eduardo & Wildman, John, 2017. "The effect of house prices on the long-term care market: Evidence from England," MPRA Paper 81987, University Library of Munich, Germany.
    6. Piia Pekola & Ismo Linnosmaa & Hennamari Mikkola, 2017. "Does Competition Have an Effect on Price and Quality in Physiotherapy?," Health Economics, John Wiley & Sons, Ltd., vol. 26(10), pages 1278-1290, October.
    7. Sean Shenghsiu Huang & Richard A. Hirth & Jane Banaszak-Holl & Stephanie Yuan, 2017. "The Growth and Geographical Variation of Nursing Home Self-Pay Prices," Working Papers wp397, University of Michigan, Michigan Retirement Research Center.
    8. Roman Mennicken & Boris Augurzky & Heinz Rothgang & Jürgen Wasem, 2014. "Explaining differences in remuneration rates of nursing homes in Germany," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 401-410, May.
    9. repec:zbw:rwirep:0215 is not listed on IDEAS
    10. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.
    11. Forder, Julien & Allan, Stephen, 2014. "The impact of competition on quality and prices in the English care homes market," Journal of Health Economics, Elsevier, vol. 34(C), pages 73-83.
    12. Su Liu & Deborah Chollet, "undated". "Price and Income Elasticity of the Demand for Health Insurance and Health Care Services: A Critical Review of the Literature," Mathematica Policy Research Reports dbf03ba11863430593b0b825f, Mathematica Policy Research.

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