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Buyer Alliances and Managed Competition

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  • Yeon‐Koo Che
  • Ian Gale

Abstract

In a health insurance market, a large employer or an organized “buyer alliance” is in a position to influence the design of plans offered to its members. We study how the sponsors of buyer alliances manage competition among insurance firms by focusing on their choices of the format of competition, the number of firms allowed to compete, and the quality of care offered by the firms. We find deviations from optimality in all three dimensions. Specifically, we find a tendency toward too many firms and too much quality, and a bias toward a format involving the prescreening of insurance plans by the sponsor.

Suggested Citation

  • Yeon‐Koo Che & Ian Gale, 1997. "Buyer Alliances and Managed Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 175-200, March.
    • Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:175-200
    DOI: 10.1111/j.1430-9134.1997.00175.x
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    References listed on IDEAS

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    Cited by:

    1. O. Loginova & A. Mantovani, 2015. "Information and Online Reviews," Working Papers wp996, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Xinxin Li & Yuxin Chen, 2012. "Corporate IT Standardization: Product Compatibility, Exclusive Purchase Commitment, and Competition Effects," Information Systems Research, INFORMS, vol. 23(4), pages 1158-1174, December.
    3. Oksana Loginova & Andrea Mantovani, 2019. "Price competition in the presence of a web aggregator," Journal of Economics, Springer, vol. 126(1), pages 43-73, January.
    4. Chris Doyle & Martijn Han, 2014. "Cartelization Through Buyer Groups," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(3), pages 255-275, May.
    5. Ma, Ching-to Albert, 2004. "Public rationing and private cost incentives," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 333-352, January.
    6. Xiaoqing Jing & Jinhong Xie, 2011. "Group Buying: A New Mechanism for Selling Through Social Interactions," Management Science, INFORMS, vol. 57(8), pages 1354-1372, August.
    7. Erbao Cao & He Li, 2020. "Group buying and consumer referral on a social network," Electronic Commerce Research, Springer, vol. 20(1), pages 21-52, March.
    8. Pedro Pita Barros & Xavier Martinez‐Giralt, 2002. "Public and Private Provision of Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 109-133, March.
    9. Marvel, Howard P. & Yang, Huanxing, 2008. "Group purchasing, nonlinear tariffs, and oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1090-1105, September.

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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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