Quality competition versus uninsurance in health care markets

Abstract

We consider a model of quality competition among health care providers and demonstrate that the equilibrium in the market is characterized by strict differentiation in the quality of care that is offered to consumers. The market outcome generates excessive investment in quality in comparison to the socially optimal outcome and, as a result, an excessive number of low income individuals who find health care unaffordable. The extent of deviation from universal coverage is more severe the lower the co-insurance rates paid by individuals.

Citation

Gal-Or, E. (2000), "Quality competition versus uninsurance in health care markets", Advances in Applied Microeconomics (Advances in Applied Microeconomics, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 1-43. https://doi.org/10.1016/S0278-0984(99)08002-5