Nursing Homes’ Competition and Distributional Implications When the Market Is Two-Sided

39 Pages Posted: 8 Aug 2018

See all articles by David Bardey

David Bardey

Universidad de los Andes, Colombia - Department of Economics

Luigi Siciliani

University of York

Date Written: June 20, 2018

Abstract

We investigate the effect of competition in the nursing homes sector with a two-sided market approach. More precisely, we investigate the distributional implications across the three key actors involved (residents, nurses and nursing homes) that arise from the two-sidedness of the market. Within a Hotelling set up, nursing homes compete for residents and for nurses, who provide quality to residents, by setting residents price and nurses wage. Nurses are assumed altruistic and therefore motivated to provide quality. The market is two-sided because: i) a higher number of residents affects nurses workload, which affects their willingness to provide labour supply; and ii) a higher number of nurses affects residents quality through a better matching process and by relaxing nurses time constraints. Our key findings are that i) the two-sidedness of the market leads to higher wages for nurses, which makes the nurses better off; ii) this is then passed to residents in the form of higher prices, which makes residents worse off; iii) nursing homes profits are instead unaffected. In contrast, when nurses wages are regulated, the two-sidedness of the market implies a transfer between residents and nursing homes. When residents price are regulated, it implies a transfer between nurses and nursing homes. These results are robust to institutional settings which employ pay-for-performance schemes (that reward either nursing homes or nurses): the two-sidedness of the market is strengthened and residents are still worse off.

Keywords: nursing homes; competition; two-sided markets; distribution

JEL Classification: I18

Suggested Citation

Bardey, David and Siciliani, Luigi, Nursing Homes’ Competition and Distributional Implications When the Market Is Two-Sided (June 20, 2018). Documento CEDE No. 2018-37, Available at SSRN: https://ssrn.com/abstract=3216672 or http://dx.doi.org/10.2139/ssrn.3216672

David Bardey (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Luigi Siciliani

University of York ( email )

Heslington
University of York
York, YO10 5DD
United Kingdom

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