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Provider competition and over-utilization in health care

  • Jan Boone


  • Rudy Douven


This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We show that CfM is optimal if the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payer’s and patients’ preferences are aligned.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 275.

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Date of creation: Apr 2014
Date of revision:
Handle: RePEc:cpb:discus:275
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  1. Michel Mougeot & Florence Naegelen, 2005. "Hospital Price Regulation and Expenditure Cap Policy," Post-Print hal-00448979, HAL.
  2. Erik Schut & Stéphane Sorbe & Jens Høj, 2013. "Health Care Reform and Long-Term Care in the Netherlands," OECD Economics Department Working Papers 1010, OECD Publishing.
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  4. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  5. Chalkley, M. & Malcomson, J.M., 1995. "Contracting for health services with unmonitored quality," Discussion Paper Series In Economics And Econometrics 9510, Economics Division, School of Social Sciences, University of Southampton.
  6. Pope, Devin G., 2009. "Reacting to rankings: Evidence from "America's Best Hospitals"," Journal of Health Economics, Elsevier, vol. 28(6), pages 1154-1165, December.
  7. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-49, April.
  8. David Cutler, 2006. "The Economics of Health System Payment," De Economist, Springer, vol. 154(1), pages 1-18, 03.
  9. Schut, Frederik T. & Varkevisser, Marco, 2013. "Tackling hospital waiting times: The impact of past and current policies in the Netherlands," Health Policy, Elsevier, vol. 113(1), pages 127-133.
  10. Amitabh Chandra & Douglas O. Staiger, 2007. "Productivity Spillovers in Health Care: Evidence from the Treatment of Heart Attacks," Journal of Political Economy, University of Chicago Press, vol. 115, pages 103-140.
  11. Amitabh Chandra & Jonathan S. Skinner, 2011. "Technology Growth and Expenditure Growth in Health Care," NBER Working Papers 16953, National Bureau of Economic Research, Inc.
  12. Marie Allard & Pierre Thomas Léger & Lise Rochaix, 2004. "Provider Competition in a Dynamic Setting," Cahiers de recherche 04-07, HEC Montréal, Institut d'économie appliquée.
  13. Giuffrida, Antonio & Gravelle, Hugh, 2001. "Inducing or restraining demand: the market for night visits in primary care," Journal of Health Economics, Elsevier, vol. 20(5), pages 755-779, September.
  14. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  15. Dranove, David & Shanley, Mark & White, William D, 1993. "Price and Concentration in Hospital Markets: The Switch from Patient-Driven to Payer-Driven Competition," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 179-204, April.
  16. van de Vijsel, Aart R. & Engelfriet, Peter M. & Westert, Gert P., 2011. "Rendering hospital budgets volume based and open ended to reduce waiting lists: Does it work?," Health Policy, Elsevier, vol. 100(1), pages 60-70, April.
  17. Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, vol. 59(2), pages 479-501, March.
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