Location choice and quality competition in mixed hospital markets

Burkhard Hehenkamp and Oddvar Kaarboe ()

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 641-660

Abstract: Many countries have opened their health care markets to private for-profit providers, aiming to promote quality and choice for patients. The prices are regulated and providers compete in location and quality. We show that whereas opening a public hospital market typically raises quality, the private provider strategically locates towards the corner of the market to avoid costly quality competition. Social welfare depends on the size of the regulator’s budget and on the altruism of the public provider. If the budget is large, high quality results and welfare is highest in a duopoly whenever entry is optimal. If the budget is small, quality levels in a duopoly mirror the quality level in a monopoly. It can be optimal for the regulator not to use the full budget.

Keywords: Quality competition; Mixed oligopoly; Price regulation; Location choice; Product differentiation (search for similar items in EconPapers)
JEL-codes: D43 I18 L13 L51 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:177:y:2020:i:c:p:641-660

DOI: 10.1016/j.jebo.2020.06.026

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