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Competition on Unobserved Attributes: The Case of the Hospital Industry

P. Choné and Lionel Wilner
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P. Choné: Crest-Ensae

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: To assess strategic interactions in industries where endogenous product characteristics are unobserved to the researcher, we propose an empirical method that brings a competition-in-utility-space framework to the data. We apply the method to the French hospital industry. The utilities offered to patients are inferred from local market shares under AKM exclusion restrictions. The hospitals' objective functions are identified thanks to the gradual introduction of stronger financial incentives over the period of study. Offering more utility to each patient entails incurring higher costs per patient, implying that utilities are mostly strategic complements. Counterfactual simulations show that stronger incentives affect market shares but have little impact on the total number of patient admissions. We quantify the resulting gains for patients and losses for hospitals.

Keywords: Competition in utility space; financial incentives; payment reform; hospital choice (search for similar items in EconPapers)
JEL-codes: D22 D43 I11 L13 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com and nep-hea
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https://www.insee.fr/fr/statistiques/fichier/version-html/4220229/G2019-07.pdf Document de travail de la DESE numéro G2019/07 (application/pdf)

Related works:
Working Paper: Competition on Unobserved Attributes: The Case of the Hospital Industry (2020) Downloads
Working Paper: Competition on Unobserved Attributes: The Case of the Hospital Industry (2019) Downloads
Working Paper: Complementarity or substitutability in networks? Methodology and application to the hospital industry (2015) Downloads
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