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Regulation and Hospital Competition in a Medical Arms Race

Listed author(s):
  • Fournier, G.M.
  • Schumacher, E.J.
Registered author(s):

    This paper provides a model of hospital competition to explain the "medical arms race", i.e. the tendency of hospitals to over-invest in specialized services. The model examines how hospitals gain an edge ("prestige effect") by adopting a larger complement of services than their rivals. In a medical arms race, ,arket outcomes are made worse than what results under free entry with Cournot interaction. Simulations of equilibria identify cost and demand conditions that lead to the over-provision of services.

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    Paper provided by Department of Economics, Florida State University in its series Working Papers with number 1996_09_01.

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    Length: 29 pages
    Date of creation: 1996
    Handle: RePEc:fsu:wpaper:1996_09_01
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