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From competition to co-operation: new economic relationships in the National Health Service


  • Maria Goddard

    (Centre for Health Economics, University of York, UK)

  • Russell Mannion

    (Centre for Health Economics, University of York, UK)


The Labour government has outlined its plans to 'replace' the competitive internal market with a more collaborative system based on partnership. Agreement amongst purchasers and providers is to be based on co-operation rather than competition. Longer term agreements covering periods of 3-5 years are to replace annual contracts within this new environment. The aim of this paper is to explore the potential economic implications of these policy changes by drawing on the economics of co-operation and the transaction costs approach to longer term contracting. Issues surrounding the role of trust in contractual relationships are explored and the relevance of experience and evidence from non-health care sectors is considered in the context of the NHS. It is concluded that both theory and empirical evidence suggest that co-operation and trust can play a central role in the efficient organisation of contractual arrangements in circumstances similar to those under which the NHS operates. However, we warn against the expectation that the policy changes will produce automatically the scale of benefits predicted by the Labour government, especially as they will have to find a way of extracting reasonable performance from providers under a system of collaboration and long term agreements. They may find they need to tread a fine line between competition and co-operation in order to reap the benefits of both. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Maria Goddard & Russell Mannion, 1998. "From competition to co-operation: new economic relationships in the National Health Service," Health Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 105-119.
  • Handle: RePEc:wly:hlthec:v:7:y:1998:i:2:p:105-119
    DOI: 10.1002/(SICI)1099-1050(199803)7:2<105::AID-HEC333>3.0.CO;2-K

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    Cited by:

    1. Huw Talfryn Oakley Davies & Russell Mannion, 1999. "Clinical governance: striking a balance between checking and trusting," Working Papers 165chedp, Centre for Health Economics, University of York.
    2. Maria Goddard & Russell Mannion & Peter Smith, 2000. "Enhancing performance in health care: a theoretical perspective on agency and the role of information," Health Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 95-107.
    3. Natasha Palmer & Anne Mills, 2003. "Classical versus relational approaches to understanding controls on a contract with independent GPs in South Africa," Health Economics, John Wiley & Sons, Ltd., vol. 12(12), pages 1005-1020.
    4. Brian Ferguson, 1998. "Shaping up to improve health: the strategic leadership role of the new Health Authority," Working Papers 162chedp, Centre for Health Economics, University of York.
    5. Guinness, Lorna, 2011. "What can transaction costs tell us about governance in the delivery of large scale HIV prevention programmes in southern India?," Social Science & Medicine, Elsevier, vol. 72(12), pages 1939-1947, June.

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