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Competition in the provision of hospital care: Are mixed markets a valid alternative?

Laura Levaggi and Rosella Levaggi

Economic Modelling, 2023, vol. 127, issue C

Abstract: Mixed markets for healthcare, where public hospitals compete alongside private ones, are widespread, however, evidence of their desirability is inconclusive. This study, accounts for the observed differences in providers’ objectives and patients’ preferences in the market for hospital care through a spatial competition model with a public provider at the center. We show that a mixed market may be the welfare maximizing choice when some conditions are met; however, we highlight the potential trade-off between quality and other welfare measures. Policymakers that want to introduce competition should try to sustain patient bias for public provision since it increases the average quality of care. They may also consider monopoly franchises to redistribute benefits when mixed markets increase the profit of private providers. Profit retention can also increase quality, but privatization must be partial to maintain the value of public supply.

Keywords: Mixed markets; Salop competition; Reference provider; Intrinsic motivation; Partial privatization (search for similar items in EconPapers)
JEL-codes: D47 H44 L51 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:127:y:2023:i:c:s0264999323002845

DOI: 10.1016/j.econmod.2023.106472

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