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Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market

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  • Van Biesebroeck, Johannes
  • Grant, Iris

Abstract

Mostly due to population aging, the demand for long-term care (LTC) services is growing strongly. Historically, non-profit nursing homes dominated the German LTC market, but the recent entry wave was tilted towards for-profit competitors. Using a rich administrative dataset on all LTC facilities in Germany, we examine strategic interaction between these two ownership types in a static entry model. The estimates of competitive effects imply that non-profit and for-profit homes are substitutes, but competition is much stronger within-type, suggesting that they provide differentiated products. For-profit homes in particular act as if they operate in a different market segment, but over time their entry behavior has converged to that of the more established non-profits. Counterfactual simulations of proposed changes in government policy suggest a large impact on the fraction of markets that remain unserved or only served by a single type.

Suggested Citation

  • Van Biesebroeck, Johannes & Grant, Iris, 2019. "Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market," CEPR Discussion Papers 14005, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14005
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    More about this item

    Keywords

    Competition; Long-term care; Non-profit; For-profit;
    All these keywords.

    JEL classification:

    • 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
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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