IDEAS home Printed from https://ideas.repec.org/p/col/000092/007457.html
   My bibliography  Save this paper

Healt care network formation and policyholders'welfare

Author

Listed:
  • David Bardey

    ()

  • Jean-Marc Bourgeon

    ()

Abstract

We develop a model in which two insurers and two health care providers compete for a fixed mass of policyholders. Insurers compete in premium and offer coverage against financial consequences of health risk. They have the possibility to sign agreements with providers to establish a health care network. Providers, partially altruistic, are horizontally differentiated with respect to their physical address. They choose the health care quality and compete in price. First, we show that policyholders are better off under a competition between conventional insurance rather than under a competition between integrated insurers (Managed Care Organizations). Second, we reveal that the competition between a conventional insurer and a Managed Care Organization (MCO) leads to a similar equilibrium than the competition between two MCOs characterized by a different objective i.e. private versus mutual. Third, we point out that the ex ante providers' horizontal differentiation leads to an exclusionary equilibriumin which both insurers select one distinct provider. This result is in sharp contrast with frameworks that introduce the concept of option value to model the (ex post) horizontal differentiation between providers.

Suggested Citation

  • David Bardey & Jean-Marc Bourgeon, 2010. "Healt care network formation and policyholders'welfare," DOCUMENTOS DE TRABAJO 007457, UNIVERSIDAD DEL ROSARIO.
  • Handle: RePEc:col:000092:007457
    as

    Download full text from publisher

    File URL: http://repository.urosario.edu.co/bitstream/handle/10336/11120/7457.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-763, Winter.
    2. Thomas Buchmueller & John Dinardo, 2002. "Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut," American Economic Review, American Economic Association, vol. 92(1), pages 280-294, March.
    3. Ching-To Albert Ma & Michael H. Riordan, 2002. "Health Insurance, Moral Hazard, and Managed Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 81-107, March.
    4. Bijlsma, Michiel & Boone, Jan & Zwart, Gijsbert, 2009. "Selective contracting and foreclosure in health care markets," CEPR Discussion Papers 7576, C.E.P.R. Discussion Papers.
    5. David Bardey & Jean-Charles Rochet, 2010. "Competition Among Health Plans: A Two-Sided Market Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 435-451, June.
    6. Bourgeon, Jean-Marc & Picard, Pierre & Pouyet, Jerome, 2008. "Providers' affiliation, insurance and collusion," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 170-186, January.
    7. Andrew M. Jones (ed.), 2006. "The Elgar Companion to Health Economics," Books, Edward Elgar Publishing, number 3572.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Bardey & Giancarlo Buitrago, 2015. "Integración vertical en el sector de la salud colombiano," DOCUMENTOS CEDE 014069, UNIVERSIDAD DE LOS ANDES-CEDE.
    2. Sorek Gilad, 2016. "Competition and Product Choice in Option Demand Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 785-805, April.
    3. Sorek, Gilad, 2016. "Competition and consumer choice in option demand markets," Economics Letters, Elsevier, vol. 146(C), pages 13-16.
    4. Gilad Sorek, 2015. "Health Insurance and Competition in Health Care Markets," Auburn Economics Working Paper Series auwp2015-03, Department of Economics, Auburn University.
    5. Edmond Baranes & David Bardey, 2015. "Competition between health maintenance organizations and nonintegrated health insurance companies in health insurance markets," Health Economics Review, Springer, vol. 5(1), pages 1-9, December.

    More about this item

    Keywords

    Health Care Network; Horizontal Differentiation; HealthCare Quality;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000092:007457. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Facultad de Economía). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.