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On the bright side of market concentration in a mixed-oligopoly healthcare industry

Author

Listed:
  • Michele Bisceglia

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UniBg - Università degli Studi di Bergamo = University of Bergamo)

  • A. Jorge Padilla

    (Compass Lexecon)

  • Salvatore Piccolo

    (Compass Lexecon)

  • Pekka Saaskilahti

    (CSEF - Centre of Studies in Economics and Finance - UNISA - Università degli Studi di Salerno = University of Salerno)

Abstract

We describe the healthcare industry as a mixed oligopoly, where a public and two private providers compete, and examine the effects of a merger between the two private healthcare providers on prices, quality, and welfare. When the price and (eventually) quality of the public provider are regulated, the cost synergies required for the merger to increase consumer welfare are less significant than in a setting with only profit-maximizing providers. When, instead, the public provider can adjust its policy to the rivals' behavior and maximizes a weighted sum of profits and consumer surplus (i.e., it has ‘semi-altruistic' preferences), the merger is consumer surplus increasing if the public provider is sufficiently altruist, in some cases even absent efficiencies. These results suggest that ignoring the role and objectives of the public sector in the healthcare industry may lead agencies to reject mergers that, while would decrease consumer welfare in fully privatized industries, would increase it in mixed oligopolies.

Suggested Citation

  • Michele Bisceglia & A. Jorge Padilla & Salvatore Piccolo & Pekka Saaskilahti, 2023. "On the bright side of market concentration in a mixed-oligopoly healthcare industry," Post-Print hal-04934622, HAL.
    • Handle: RePEc:hal:journl:hal-04934622
    DOI: 10.1016/j.jhealeco.2023.102771
    as

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