Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision

Stenbacka Rune () and Tombak Mihkel ()
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Stenbacka Rune: Hanken School of Economics, P.O. Box 479, 00101Helsinki,Finland
Tombak Mihkel: Department of Management, UTM, Institute for Management and Innovation, University of Toronto, 3359 Mississauga Rd, MississaugaON L5L 1C6, Canada

The B.E. Journal of Economic Analysis & Policy, 2018, vol. 18, issue 1, 19

Abstract: We analytically characterize the effects of ownership and competition in the healthcare industry on quality provision, market coverage and optimal reimbursement policy. A for-profit monopoly selects a lower quality than a nonprofit supplier, and the socially optimal reimbursement rate with a nonprofit monopoly exceeds that with a for-profit monopoly. We establish that the optimal repayment policy is invariant to the introduction of competition by a for-profit high-quality supplier. Thus, market coverage is invariant to the introduction of competition, whereas consumers with a higher willingness to pay for quality are better off with competition.

Keywords: for-profit vs nonprofit healthcare provision; competition in healthcare; healthcare quality; quality differentiation; mixed duopoly (search for similar items in EconPapers)
JEL-codes: I11 I18 L10 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1515/bejeap-2017-0122

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