Competition between For-Profit and Nonprofit Health Care Providers and Quality

Rune Stenbacka and Mihkel Tombak

Journal of Institutional and Theoretical Economics (JITE), 2020, vol. 176, issue 2, 243-275

Abstract: We develop a model including many features of health care systems: a limited number of approved treatments of certain qualities, insurance schemes reimbursing costs of a standard service, and nonprofit organizations competing with for-profit suppliers. All the equilibria exhibit quality differentiation, and the nonprofit captures a higher market share. Nonprofits (for-profits) supply the standard service when the quality upgrade induces a sufficiently high (low) increase in production costs. When the nonprofit provides the standard quality, all patients are served. In contrast, in a for-profit duopoly the standard-quality provider charges a price premium, implying that there are excluded consumers.

Keywords: nonprofit organizations; health care quality; competition between for-profits and nonprofits; exclusion; quality differentiation; mixed duopoly (search for similar items in EconPapers)
JEL-codes: I11 L30 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1628/jite-2020-0002

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