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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

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Volume 18, Issue 1


Volume 19 (2019)

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision

Rune Stenbacka / Mihkel Tombak
  • Department of Management, UTM, Institute for Management and Innovation, University of Toronto, 3359 Mississauga Rd, Mississauga ON L5L 1C6, Canada
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Published Online: 2018-01-23 | DOI: https://doi.org/10.1515/bejeap-2017-0122


We analytically characterize the effects of ownership and competition in the healthcare industry on quality provision, market coverage and optimal reimbursement policy. A for-profit monopoly selects a lower quality than a nonprofit supplier, and the socially optimal reimbursement rate with a nonprofit monopoly exceeds that with a for-profit monopoly. We establish that the optimal repayment policy is invariant to the introduction of competition by a for-profit high-quality supplier. Thus, market coverage is invariant to the introduction of competition, whereas consumers with a higher willingness to pay for quality are better off with competition.

Keywords: for-profit vs nonprofit healthcare provision; competition in healthcare; healthcare quality; quality differentiation; mixed duopoly

JEL Classification: I11; I18; L10


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Published Online: 2018-01-23

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 18, Issue 1, 20170122, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/bejeap-2017-0122.

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