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Competition Among Insurers and Consumer Welfare

Matthew White ()

No 16-02, Working Papers from University of Delaware, Department of Economics

Abstract: This article presents a model to analyze consumer welfare, price, and competition in a three-way market among consumers, medical providers, and insurers. While insurers compete with each other for customers, they also act as collective bargaining agents on behalf of consumers in determining the equilibrium price of health care with providers. The entry of an additional insurer thus has contradictory effects on welfare, reducing premiums through competition but increasing price through reduced bargaining power of incumbent insurers. Moreover, the more favorable contracts allow consumers to purchase care more often, shifting out the demand curve for care and increasing price.

Keywords: Medical insurance; consumer welfare; insurer competition; bargaining (search for similar items in EconPapers)
JEL-codes: D43 I11 L13 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2016
New Economics Papers: this item is included in nep-com, nep-ias, nep-ind and nep-mkt
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