DP9325 Competition, Equity and Quality in HealthCare

Author(s):	Maija Halonen-Akatwijuka, Carol Propper
Publication Date:	January 2013
Keyword(s):	competition, equity, hospitals, quality
JEL(s):	D63, H11, I11, I14, L31
Programme Areas:	Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=9325

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.