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Competition in Health Care Markets and Vertical Restraints

Author

Listed:
  • Baranes, E.
  • Bardey, D.

Abstract

This paper studies competition between Managed Care Organizations (MCOs) and “Conventional Insurers”. Most of the time, MCOs sign exclusive contracts with providers and these vertical restrictions associated to differentiation in the providers'market imply a risk segmentation. Taking into account this phenomenon, we show that vertical restrictions in the health insurance sector can paradoxically create an “anti-raise rivals cost effect” in which MCOs. penetration allows to decrease conventional insurers premiums.

Suggested Citation

  • Baranes, E. & Bardey, D., 2004. "Competition in Health Care Markets and Vertical Restraints," Cahiers du CREDEN (CREDEN Working Papers) 04.05.45, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
  • Handle: RePEc:mop:credwp:04.05.45
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    File URL: http://www.creden.univ-montp1.fr/downloads/cahiers/CC-04-05-45.pdf
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    References listed on IDEAS

    as
    1. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    3. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    4. Esther Gal-Or, 1999. "Mergers and Exclusionary Practices in Health Care Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(3), pages 315-350, September.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. Brooks, John M. & Dor, Avi & Wong, Herbert S., 1997. "Hospital-insurer bargaining: An empirical investigation of appendectomy pricing," Journal of Health Economics, Elsevier, vol. 16(4), pages 417-434, August.
    7. Esther Gal-Or, 1997. "Exclusionary Equilibria in Health-Care Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 5-43, March.
    8. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    9. Baker, Laurence C & Corts, Kenneth S, 1996. "HMO Penetration and the Cost of Health Care: Market Discipline or Market Segmentation?," American Economic Review, American Economic Association, vol. 86(2), pages 389-394, May.
    10. Martin Gaynor & Deborah Haas-Wilson, 1999. "Change, Consolidation, and Competition in Health Care Markets," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 141-164, Winter.
    11. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
    12. T Rice & R Labelle, 1989. "Do Physicians Induce Demand for Medical Service?," Centre for Health Economics and Policy Analysis Working Paper Series 18, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
    13. Ching-To Albert Ma, 1997. "Option Contracts and Vertical Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 725-753, December.
    14. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, pages 526-548.
    15. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
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    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. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    3. Salah M. Diab, 2014. "Using the Competitive Dimensions to Achieve Competitive Advantage A Study on Jordanian Private Hospitals," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(9), pages 138-150, September.

    More about this item

    Keywords

    VERTICAL RESTRAINTS; MANAGED CARE; COMPETITION POLICY.;

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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