Regulating internal markets for hospital care
- Rosella Levaggi
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Internal markets have been created in an attempt to shift power from producers to consumers in a context where consumers have very weak incentives to seek out low-cost producers and have little knowledge about the quality of health care. The idea is that by establishing public agencies to act as the sole purchasers on behalf of consumers in their area of jurisdiction, the asymmetry of information can be moderated and a more competitive environment created in which costs will be minimized and quality enhanced. Whether these aspirations can be fulfilled will depend on how the internal market is organized. In this article the cost-minimizing properties of alternative market structures where hospitals do not share the same objectives are examined. The scheme is designed from the standpoint of a benevolent regulator that provides services using two hospitals with fixed locations. The paper shows that price discrimination is a superior instrument. Finally some market forms are always dominated and should be avoided.
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- Regulating internal markets for hospital care
Journal of Regulatory Economics
Volume 32, Issue 2 , pp 173-193
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Internal markets
- Asymmetry of Information
- Hospital care
- Industry Sectors
- Rosella Levaggi (1)
- Author Affiliations
- 1. Dipartimento di Scienze Economiche, Università di Brescia, Via S. Faustino 74/b, Brescia, 25122, Italy