Working Paper: CEPR ID: DP9325
Authors: Maija Halonen-Akatwijuka; Carol Propper
Abstract: In this paper we focus on the implications of consumer heterogeneity for whether competition will improve outcomes in health care markets. We show that competition generally favours the majority group as higher quality for the majority is an effective way to increase the quality signal and attract patients. A regulator who is concerned about equity may protect the minority group by not introducing competition. Alternatively, if the minority group is favoured by the providers under monopoly, competition can improve equity by forcing the providers to increase quality for the majority group.
Keywords: competition; equity; hospitals; quality
JEL Codes: D63; H11; I11; I14; L31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| competition (L13) | higher average quality (L15) |
| higher average quality (L15) | benefits majority group (J15) |
| competition (L13) | exacerbates inequities (I24) |
| regulator not introducing competition (L43) | protects minority group (J15) |
| monopoly (D42) | favors minority group (J15) |
| competition (L13) | improves equity (D63) |
| welfare-maximizing regulator (D69) | considers dynamics of competition and equity (D43) |