Competition and Product Choice in Option Demand Markets

Gilad Sorek

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 2, 785-805

Abstract: This work presents the first analysis of competition through horizontal and vertical differentiation in option demand markets, which are common in the health-care sector. I studied two alternative market structures: (a) a “pure” option demand market where medical providers sell insurance directly to consumers and (b) a public insurance regime where the public insurer bargains over prices with providers before bundling both products under a single insurance policy. I show that (a) product choices in option demand markets differ greatly from those in respective spot markets and (b) bundling medical products under a single insurance policy alters product choices and equilibrium prices in a way that does not benefit consumers.

Keywords: medical insurance; option demand; product differentiation (search for similar items in EconPapers)
JEL-codes: I11 I13 L1 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Working Paper: Competition and Product Choice in Option Demand Markets (2015)
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DOI: 10.1515/bejeap-2015-0164

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