Bardey, David and Bourgeon, Jean-Marc (2010) Health Care Network Formation and Policyholders' Welfare. TSE Working Paper, n. 10-183, Toulouse

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Abstract

We develop a model in which two insurers and two health care providers compete for a fixed mass of policyholders. Insurers compete in premium and offer coverage against financial consequences of health risk. They have the possibility to sign agreements with providers to establish a health care network. Providers, partially altruistic, are horizontally differentiated with respect to their physical address. They choose the health care quality and compete in price. First, we show that policyholders are better off under a competition between conventional insurance rather than under a competition between integrated insurers (Managed Care Organizations). Second, we reveal that the competition between a conventional insurer and a Managed Care Organization (MCO) leads to a similar equilibrium than the competition between two MCOs characterized by a different objective i.e. private versus mutual. Third, we point out that the ex ante providers' horizontal differentiation leads to an exclusionary equilibrium in which both insurers select one distinct provider. This result is in sharp contrast with frameworks that introduce the concept of option value to model the (ex post) horizontal differentiation between providers.

Item Type: Monograph (Working Paper)
Language: English
Date: 11 August 2010
Place of Publication: Toulouse
Uncontrolled Keywords: Health care network, horizontal differentiation, health care quality
JEL Classification: I11 - Analysis of Health Care Markets
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L14 - Transactional Relationships; Contracts and Reputation; Networks
L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 18 Jan 2012 06:02
Last Modified: 02 Apr 2021 15:36
OAI Identifier: oai:tse-fr.eu:23112
URI: https://publications.ut-capitole.fr/id/eprint/3410
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