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Quality Differentiation Under Mixed Competition in Hospital Markets

Author

Listed:
  • Modhurima Dey Amin

    (Washington State University)

  • Syed Badruddoza

    (Washington State University)

  • Robert Rosenman

    (Washington State University)

Abstract

We use a Hotelling-type model of two hospitals, one for-profit (FP) and the other not-for-profit (NFP) using quality to compete for patients. In an equilibrium that constrains the NFP to zero profits, the NFP share of the market decreases as fixed costs or patient’s marginal utility of quality increase, or as transportation and marginal quality costs decrease, conditions that make quality a more effective tool for attracting patients, improving the ability of the FP to compete for market share. We show that an NFP hospital cannot take the entire market without significant fundraising ability. The market shares predicted by our model are consistent with what is presently observed in Europe and the US.

Suggested Citation

  • Modhurima Dey Amin & Syed Badruddoza & Robert Rosenman, 2018. "Quality Differentiation Under Mixed Competition in Hospital Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(4), pages 473-484, December.
    • Handle: RePEc:kap:jincot:v:18:y:2018:i:4:d:10.1007_s10842-017-0267-y
    DOI: 10.1007/s10842-017-0267-y
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    References listed on IDEAS

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    Cited by:

    1. Ziad R. Ghandour, 2019. "Public-Private Competition in Regulated Markets," NIPE Working Papers 02/2019, NIPE - Universidade do Minho.

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    More about this item

    Keywords

    Hospital; Not-for-profit; Mixed competition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • I1 - Health, Education, and Welfare - - Health

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