Strategic behaviour and decision making in competitive hospital markets: an experimental investigation

Johann Han (), Nadja Kairies-Schwarz () and Markus Vomhof ()
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Johann Han: University of Duisburg-Essen
Nadja Kairies-Schwarz: Heinrich-Heine-University Düsseldorf
Markus Vomhof: Heinrich-Heine-University Düsseldorf

International Journal of Health Economics and Management, 2024, vol. 24, issue 3, No 1, 333-355

Abstract: Abstract We investigate quality provision and the occurrence of strategic behaviour in competitive hospital markets where providers are assumed to be semi-altruistic towards patients. For this, we employ a laboratory experiment with a hospital market framing. Subjects decide on the quality levels for one of three competing hospitals respectively. We vary the organizational aspect of whether quality decisions within hospitals are made by individuals or teams. Realized monetary patient benefits go to real patients outside the lab. In both settings, we find that degrees of cooperation quickly converge towards negative values, implying absence of collusion and patient centred or competitive quality choices. Moreover, hospitals treat quality as a strategic complement and adjust their quality choice in the same direction as their competitors. The response magnitude for team markets is weaker; this is driven by non-cooperative or altruistic teams, which tend to set levels of quality that are strategically independent.

Keywords: Quality competition; Hospital markets; Team decisions; Altruism; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C92 D03 D43 D64 I11 L13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10754-024-09366-3

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