Insurance and Monopoly Power in a Mixed Private/Public Hospital System

Donald Wright

The Economic Record, 2006, vol. 82, issue 259, 460-468

Abstract: Consumers, when ill, often have the choice of being treated for free in a public hospital or at a positive price in a private hospital. To compensate for the positive price, private hospitals offer a higher quality treatment. Private hospitals and doctors also have a degree of monopoly power in their pricing. In this setting, it is shown that the introduction of an insurance premium subsidy does not affect the number of consumers treated in the private hospital, rather the private hospital and the doctor respond to the subsidy by increasing the prices they charge and the quality of the private hospital experience.

Date: 2006
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