The Effects of Competition on Variation in the Quality and Cost of Medical Care
We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in less-competitive markets receive more intensive treatment than in more-competitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in less-competitive markets receive less intensive treatment than in more-competitive markets, and have significantly worse health outcomes. Since this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.
|Date of creation:||Mar 2005|
|Date of revision:|
|Publication status:||published as Kessler, Daniel P.and Jeffrey J. Geppert. "The Effects of Competition on Variation in the Quality and Cost of Medical Care." Journal of Economics and Management Strategy 14, 3 (Fall 2005): 575-89.|
|Note:||HC IO AG|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon P. Anderson & André de Palma, 2000.
"Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?,"
Virginia Economics Online Papers
349, University of Virginia, Department of Economics.
- Anderson, Simon P & de Palma, Andre, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-35, June.
- Anderson,S.P. & de Palma,A., 1995. "Product Diversity in Asymmetric Oligopoly:Is the Quality of Consumer Goods Too Low?," Papers 9521, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- Steven T. Berry & Joel Waldfogel, 1999.
"Free Entry and Social Inefficiency in Radio Broadcasting,"
RAND Journal of Economics,
The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
- Steven Berry & Joel Waldfogel, 1996. "Free Entry and Social Inefficiency in Radio Broadcasting," NBER Working Papers 5528, National Bureau of Economic Research, Inc.
- 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 737-63, Winter.
- Daniel P. Kessler & Mark B. McClellan, 2002. "The Effects of Hospital Ownership on Medical Productivity," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 488-506, Autumn.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1980.
"Entry (and exit) in a differentiated industry,"
Journal of Economic Theory,
Elsevier, vol. 22(2), pages 327-338, April.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- Tay, Abigail, 2003. " Assessing Competition in Hospital Care Markets: The Importance of Accounting for Quality Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 786-814, Winter.
- Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May.
- Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11226. 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: ()
If references are entirely missing, you can add them using this form.