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Health and Pollution in a Vertically Differentiated Duopoly

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  • Stefano Quarta
  • Skerdilajda Zanaj

Abstract

In this paper, we analyze a vertically differentiated mixed duopoly in medical care services. Pollution is the source of illness. The government has a dual role. It decides how much to invest to reduce the pollution level and it may participate in the health market running a public hospital. We find that the presence of the public provider increases the average quality of the service in the market and it reduces the rate of mortality. Furthermore, when the public hospital offers services with the highest quality, then this has positive spillovers on the quality offered by the private provider. Despite these positive welfare improving features, the mixed duopoly in medical care goes along with the highest level of pollution. In the presence of an increasing concern about the relationship between pollution and health, understanding the role of public intervention appears crucial.

Suggested Citation

  • Stefano Quarta & Skerdilajda Zanaj, 2019. "Health and Pollution in a Vertically Differentiated Duopoly," EERI Research Paper Series EERI RP 2019/14, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2019_14
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    Cited by:

    1. is not listed on IDEAS
    2. Firoozi, Fathali & Lien, Donald, 2021. "Public Grants Awarded to Private Firms: A Mixed Duopoly Analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 90-96.

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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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