Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies

30 Pages Posted: 29 Oct 2015

See all articles by Haizhen Lin

Haizhen Lin

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Multiple version iconThere are 2 versions of this paper

Date Written: November 2015

Abstract

This article develops a dynamic model of entry and exit to analyze quality choice and oligopoly market structure in the nursing home industry. I find significant heterogeneity in the competitive effects across market structures: Firms of similar quality levels compete more strongly than dissimilar firms. Sunken entry costs are extremely large, and quality adjustment behavior is governed by significant fixed adjustment costs. A proposal to eliminate low‐quality nursing homes is found to cause a large supply‐side shortage, and another proposal to lower entry costs has offered a perverse incentive to provide low quality of care.

Suggested Citation

Lin, Haizhen, Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies (November 2015). International Economic Review, Vol. 56, Issue 4, pp. 1261-1290, 2015. Available at SSRN: https://ssrn.com/abstract=2682787 or http://dx.doi.org/10.1111/iere.12137

Haizhen Lin (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

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