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Strategic behaviour and decision making in competitive hospital markets: an experimental investigation

Author

Listed:
  • Johann Han

    (University of Duisburg-Essen
    CINCH (Competent in Competition and Health))

  • Nadja Kairies-Schwarz

    (Heinrich-Heine-University Düsseldorf
    German Diabetes Center, Leibniz Center for Diabetes Research at Heinrich-Heine-University Düsseldorf)

  • Markus Vomhof

    (Heinrich-Heine-University Düsseldorf
    German Diabetes Center, Leibniz Center for Diabetes Research at Heinrich-Heine-University Düsseldorf)

Abstract

We investigate quality provision and the occurrence of strategic behaviour in competitive hospital markets where providers are assumed to be semi-altruistic towards patients. For this, we employ a laboratory experiment with a hospital market framing. Subjects decide on the quality levels for one of three competing hospitals respectively. We vary the organizational aspect of whether quality decisions within hospitals are made by individuals or teams. Realized monetary patient benefits go to real patients outside the lab. In both settings, we find that degrees of cooperation quickly converge towards negative values, implying absence of collusion and patient centred or competitive quality choices. Moreover, hospitals treat quality as a strategic complement and adjust their quality choice in the same direction as their competitors. The response magnitude for team markets is weaker; this is driven by non-cooperative or altruistic teams, which tend to set levels of quality that are strategically independent.

Suggested Citation

  • Johann Han & Nadja Kairies-Schwarz & Markus Vomhof, 2024. "Strategic behaviour and decision making in competitive hospital markets: an experimental investigation," International Journal of Health Economics and Management, Springer, vol. 24(3), pages 333-355, September.
    • Handle: RePEc:kap:ijhcfe:v:24:y:2024:i:3:d:10.1007_s10754-024-09366-3
    DOI: 10.1007/s10754-024-09366-3
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    More about this item

    Keywords

    Quality competition; Hospital markets; Team decisions; Altruism; Laboratory experiment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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