Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market

Iris Grant, Iris Kesternich and Johannes Van Biesebroeck

No 652689, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Mostly due to population aging, the demand for long-term care (LTC) services is growing strongly. Historically, non-profit nursing homes dominated the German LTC market, but the recent entry wave was tilted towards for-profit competitors. Using a rich administrative dataset on all LTC facilities in Germany, we examine strategic interaction between these two ownership types in a static entry model. The estimates of competitive effects imply that non-profit and for-profit homes are substitutes, but competition is much stronger within-type, suggesting that they provide differentiated products. For-profit homes in particular act as if they operate in a different market segment, but over time their entry behavior has converged to that of the more established non-profits. Counterfactual simulations of proposed changes in government policy suggest a large impact on the fraction of markets that remain unserved or only served by a single type.

Pages: 52
Date: 2020-04-01
New Economics Papers: this item is included in nep-age, nep-com and nep-hea
Note: paper number DPS 20.03
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Published in FEB Research Report Department of Economics

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https://lirias.kuleuven.be/retrieve/572081 Published version (application/pdf)

Related works:
Journal Article: ENTRY DECISIONS AND ASYMMETRIC COMPETITION BETWEEN NON‐PROFIT AND FOR‐PROFIT HOMES IN THE LONG‐TERM CARE MARKET (2022)
Working Paper: Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:652689

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