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Title: Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market

Author(s): Iris Grant, Iris Kesternich and Johannes Van Biesebroeck

Publication Date: September 2019

Keyword(s): Competition, For-profit, Long-term care and non-profit

Programme Area(s): Industrial Organization

Abstract: Mostly due to population aging, the demand for long-term care (LTC) services is growing strongly. Historically, non-profit nursing homes dominated the German LTC market, but the recent entry wave was tilted towards for-profit competitors. Using a rich administrative dataset on all LTC facilities in Germany, we examine strategic interaction between these two ownership types in a static entry model. The estimates of competitive effects imply that non-profit and for-profit homes are substitutes, but competition is much stronger within-type, suggesting that they provide differentiated products. For-profit homes in particular act as if they operate in a different market segment, but over time their entry behavior has converged to that of the more established non-profits. Counterfactual simulations of proposed changes in government policy suggest a large impact on the fraction of markets that remain unserved or only served by a single type.

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Bibliographic Reference

Grant, I, Kesternich, I and Van Biesebroeck, J. 2019. 'Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14005