Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies
30 Pages Posted: 29 Oct 2015
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Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies
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: Suggested Citation
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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Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies
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