Hotelling competition on quality in the health care market.

Abstract

This paper aims to theoretically analyse recent health system reforms. Generally patients are free to choose, within the region they live in, the best provider among the private "accredited" and public ones. The criterion patients use to choose the provider which fits their expectations best is not, at least in a tax financed system, the price of the treatment since patients do not pay directly for the treatment they receive. Crucial in determining their choice is the quality level and the provider spatial location. In a normative perspective we want to analyse hospitals' Nash/Counot and Stackelberg equilibriums in a Hotelling spatial competition scenario. Because of asymmetric information, patients could be unable to observe the true quality provided. Thus the demand for health care services is assumed to depend on a perceived quality (different from true quality). New equilibrium outcomes are investigated when patient choice is affected by uncertainty.