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The Welfare Effects of Single Rooms in German Nursing Homes: A Structural Approach

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  • Herr, A.
  • Saric, A.

Abstract

We analyze the welfare effects of single rooms in German nursing homes using a large panel dataset containing information on prices, residents, and facility characteristics for the years 2007 and 2009. We estimate a one-level nested logit model of demand and, based on the model of bargaining between payers and providers, recover the marginal costs and markups. We then analyze a counterfactual scenario under which only single rooms are offered. According to our estimates, if no corresponding total capacity changes occur, this policy increases consumer surplus by 1.8% and providers’ variable profits by 5.1%. However, under the scenario of reduced capacities, where double rooms are simply transformed into single rooms, consumer surplus decreases by 6.6% and providers’ variable profits by 16.2%. To ensure the positive welfare effects of a single room policy, the supply of nursing home places must be secured by investing in new facilities.

Suggested Citation

  • Herr, A. & Saric, A., 2016. "The Welfare Effects of Single Rooms in German Nursing Homes: A Structural Approach," Health, Econometrics and Data Group (HEDG) Working Papers 16/23, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:16/23
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    References listed on IDEAS

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    More about this item

    Keywords

    single rooms; nursing homes; policy simulation; structural models; bargaining;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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