Abstract

http://ssrn.com/abstract=238408
 
 

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Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second-Best in Health Care Markets


Martin S. Gaynor


Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation

Deborah Haas-Wilson


Smith College

William B. Vogt


RAND Corporation; National Bureau of Economic Research (NBER)


Journal of Political Economy, Vol. 108, No. 5, 2000

Abstract:     
The nature, and normative properties, of competition in health care markets has long been the subject of much debate. In this paper we consider what the optimal benchmark is in the presence of moral hazard effects on consumption due to health insurance. Intuitively, it seems that imperfect competition in the health care market may constrain this moral hazard by increasing prices. We show that this intuition cannot be correct if insurance markets are competitive. A competitive insurance market will always produce a contract that leaves consumers at least as well off under lower prices as under higher prices.

JEL Classification: D8, L1, I11, L4, D6, D4

Accepted Paper Series


Not Available For Download

Date posted: September 7, 2000  

Suggested Citation

Gaynor, Martin S. and Haas-Wilson, Deborah and Vogt, William B., Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second-Best in Health Care Markets. Journal of Political Economy, Vol. 108, No. 5, 2000. Available at SSRN: http://ssrn.com/abstract=238408

Contact Information

Martin S. Gaynor (Contact Author)
Carnegie Mellon University ( email )
H. John Heinz III School of Public Policy
and Management
Pittsburgh, PA 15213-3890
United States
412-268-7933 (Phone)
412-268-5338 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Leverhulme Centre for Market and Public Organisation
12 Priory Road
Bristol BS8 1TN
United Kingdom
Deborah Haas-Wilson
Smith College ( email )
Department of Economics
Northampton, MA 01060
United States
413-585-3636 (Phone)
413-585-3635 (Fax)
William B. Vogt
RAND Corporation ( email )
1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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