Measuring ambiguity preferences for health
Speaker(s): Olivier l'Haridon (Université of Rennes)
Date: Thursday, 8 June, 2017
Time: 11:00-12:00 (note different time)
Venue: H12-30
Contact person(s): Teresa Bago d'Uva
Abstract
In recent years, governments in the Nordic countries have opened up the health care market for private for-profit providers. These are markets where prices are regulated and competition is on location and quality. It is believed that (contestable) competition will bring forward higher quality of health care and more choice for patients. We show that increased competition, elicited by opening up a public hospital market for a private hospital, typically raises the quality provided, but that the private provider often will locate towards the corner of the market to avoid (costly) quality competition. When it comes to social welfare, the effect depends on how generous the regulator's budget is and on how altruistic the public provider is. If the budget is large so that a high level of quality can be implemented, we show that welfare is higher in duopoly than in monopoly whenever entry pays off. If the budget is small (or the public altruism is weak) and the market outcome is characterized by the providers providing the minimum quality level. In these cases, it can be optimal for the regulator not to use the full budget.