Hospital competition when patients

Research output: Working paper


Two identical hospitals compete for patients choosing qualities and prices. We study the effect ofthe introduction of preferential provider agreement. If no hospital is preferred by the regulator,patients may pay a portion of the price no matter the provider selected. Otherwise patients mayreceive a reimbursement only if choosing the hospital preferred by the regulator.We show that quality and patient surplus are always higher when hospitals are equally treatedalthough total payments and coverage might be respectively higher and lower when one provider ispreferred. A minimum quality standard has unambiguously positive effects: it increases patientsurplus, welfare and market coverage, and it decreases total payment to hospitals.
Original languageEnglish
Publication statusPublished - 2010

Publication series

NameEconomics Discussion Paper Series - University of Manchester


  • hospitals, quality, minimum quality standards, preferential provider agreements


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