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Vertical Restraints in Health Care MarketsRein HalbersmaDutch Healthcare Authority; Tilburg Law and Economics Center (TILEC) Katalin KatonaDutch Healthcare Authority; Tilburg Law and Economics Center (TILEC) January 26, 2011 TILEC Discussion Paper No. 2011-005 Abstract: We analyze health care option demand markets with vertical restraints divided along two dimensions: naked and conditional exclusion, and vertical integration; applicable to the upstream, the downstream, and both markets. Our unified framework includes forward and backward integration, and joint ventures. We show that conditional exclusion has the same bargaining effects as vertical integration, but without the joint profit optimization. There are no individual incentives for exclusive dealing, but hospital-insurer pairs can find it jointly profitable to apply downstream vertical restraints on third parties. Outright downstream monopolization arises only when consumers have strong enough preferences for free provider choice.
Number of Pages in PDF File: 36 Keywords: insurer-provider networks, vertical integration, exclusive JEL Classification: G22, G34, I11, L14, L42 working papers seriesDate posted: January 26, 2011 ; Last revised: January 27, 2011Suggested CitationContact Information
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