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Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision

Author

Listed:
  • Stenbacka Rune

    (Hanken School of Economics, P.O. Box 479, 00101Helsinki,Finland)

  • Tombak Mihkel

    (Department of Management, UTM, Institute for Management and Innovation, University of Toronto, 3359 Mississauga Rd, MississaugaON L5L 1C6, Canada)

Abstract

We analytically characterize the effects of ownership and competition in the healthcare industry on quality provision, market coverage and optimal reimbursement policy. A for-profit monopoly selects a lower quality than a nonprofit supplier, and the socially optimal reimbursement rate with a nonprofit monopoly exceeds that with a for-profit monopoly. We establish that the optimal repayment policy is invariant to the introduction of competition by a for-profit high-quality supplier. Thus, market coverage is invariant to the introduction of competition, whereas consumers with a higher willingness to pay for quality are better off with competition.

Suggested Citation

  • Stenbacka Rune & Tombak Mihkel, 2018. "Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(1), pages 1-19, January.
    • Handle: RePEc:bpj:bejeap:v:18:y:2018:i:1:p:19:n:9
    DOI: 10.1515/bejeap-2017-0122
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    References listed on IDEAS

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    More about this item

    Keywords

    for-profit vs nonprofit healthcare provision; competition in healthcare; healthcare quality; quality differentiation; mixed duopoly;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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