Public and Private Firms Competition in a Vertical Differentiation Setting – The Case of Healthcare Industry

Cristina Barbot () and Antonio Brandao
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Cristina Barbot: CETE, Faculdade de Economia, Universidade do Porto

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: With the recent wave of privatisation and liberalisation the number of state owned firms has remarkably decreased. In some industries, namely in healthcare and education, and in many countries, they go on playing an important role, alone or competing with private ones. In this paper we use a model of vertical differentiation to study the effects of the presence of public firms on the quality of healthcare and on welfare. We conclude that, when the market is covered, there must be at least one public firm so that equilibrium welfare may be positive. When the market is not covered, we show that a public monopoly is socially better than a private one, but the only possible competition is between private firms.

Keywords: public firms; competition; health (search for similar items in EconPapers)
JEL-codes: I2 L13 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2005-12
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:por:cetedp:0507

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