Quality discrimination in healthcare markets

Rosa-Branca Esteves (), Ziad Ghandour () and Odd Rune Straume
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Rosa-Branca Esteves: NIPE/Center for Research in Economics and Management, University of Minho, Portugal
Ziad Ghandour: NIPE/Center for Research in Economics and Management, University of Minho, Portugal

No 7/2022, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: Recent advances in healthcare information technologies allow healthcare providers to more accurately track patient characteristics and predict the future treatment costs of previously treated patients, which increases the scope for providers to quality discriminate across different patient types. We theoretically analyse the potential implications of such quality discrimination in a duopoly setting with profit-maximising hospitals, fixed prices and heterogeneous patients. Our analysis shows that the ability to quality discriminate tends to intensify competition and lead to higher quality provision, which benefits patients but makes the hospitals less profitable. Nevertheless, the effect on social welfare is a priori ambiguous, since quality discrimination also leads to an inefficient allocation of patients across hospitals.

Keywords: Quality discrimination; Hospital competition; Patient heterogeneity (search for similar items in EconPapers)
JEL-codes: I11 I14 L13 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-hea and nep-ict
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Citations: View citations in EconPapers (1)

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Journal Article: Quality discrimination in healthcare markets (2025)
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