Hospital Competition and Quality with Regulated Prices
Kurt Richard Brekke
Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)
University of York
Odd Rune Straume
University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)
CESifo Working Paper Series No. 2635
We analyse the effect of competition on quality in hospital markets with regulated prices, considering both the effect of (i) introducing competition (monopoly versus competition) and (ii) increasing competition through lower transportation costs (increased substitutability) or a higher number of hospitals. With semi-altruistic providers and a fairly general cost structure, we show that the relationship between competition and quality is generally ambiguous. In contrast to the received theoretical literature, this is consistent with, and potentially explains, the mixed empirical evidence.
Number of Pages in PDF File: 27
Keywords: hospitals, competition, quality
JEL Classification: H42, I11, I18, L13
Date posted: April 29, 2009
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