رقابت کیفیت با قیمت های درونی
Abstract
1- Introduction
2- Review of the theoretical literature
3- Model
4- Open-loop solution
5- Closed-loop solution
6- Welfare
7- Extensions
8- Discussion on empirical evidence
9- Policy implications and concluding remarks
References
Abstract
We develop a dynamic model of price and quality competition in order to analyze the effects of competition on quality provision and to which extent an unregulated market is able to provide a socially optimal quality level. Our model combines a differential-game approach with a Hotelling spatial competition framework, and our analysis applies in particular to industries such as long-term care, health care, child care and education. If providers (nursing homes, hospitals, schools, nurseries) use closed-loop decision rules, which imply strategic interaction over time, we show that, although increased competition leads to higher quality in the steady state, quality provision is nevertheless lower than under open-loop rules, and also suboptimally low from a welfare perspective. Thus, our analysis identifies dynamic strategic interaction between competing providers as a potential source of inefficiency in quality provision.
Introduction
Quality is a key aspect of services in long-term care, health care, child care and education, which in turn affects the way providers compete. In these industries, providers, i.e., nursing homes, hospitals, nurseries and schools (or universities), can attract more consumers not only by lowering the price, but also by increasing quality of the services they offer. For example, nursing homes can recruit more nurses, to increase time spent with residents, or recruit more qualified nurses to provide additional medical services; hospitals can provide better quality of care, both clinical quality and amenities; nurseries can introduce or improve didactic activities; schools can improve their curriculum or contact hours with pupils (students). These sectors count for a significant share of the economy and are the subject of intense political debates and policy reform. In many OECD countries, providers in these industries compete on both quality and price. This is typically the case for the markets for long-term care, where nursing homes compete on quality and price in the US, the UK and several other European countries (e.g., France). This also applies to nurseries (kindergartens) and child care provision, although some countries impose relatively strict price regulation on nurseries (e.g., Norway). In the US, universities compete on both quality and price, and this is also the case in the UK where students currently pay significant fees, mostly funded through student loans. In the US, hospitals compete on both price and quality for patients who are not part of the Medicare and Medicaid programmes. This is also the case for private hospitals in many European countries offering specialist services and surgical treatments, and other health services which are not (or poorly) covered by public insurance, e.g., dental care. In England, before 1997 hospitals competed on quality and price to obtain a contract with the Health Authority. Since 1997 a fixed price system has been introduced, but there are current discussions to eliminate the fixed price regime and allow flexibility in pricing across hospitals to accommodate local needs.