We would like to thank Paul de Bijl, Jan Boone, Marcel Canoy, Martin Gaynor, Katherine Ho, Viktoria Kocsis, Erik Schut, Misja Mikkers for their comments on preliminary versions of our paper. Furthermore, we thank participants of the IHEA conference in Beijing (2009) and EARIE conference in Ljubljana (2009), and our colleagues at the CPB and NZA for their comments during seminars at our institutes. Martin Gaynor and Katherine Ho were commissioned by the Dutch Healthcare Authority as external reviewers of an earlier draft of this paper. We are grateful to two anonymous referees and the coeditor for their careful and detailed comments and suggestions.
Vertical Integration and Exclusive Behavior of Insurers and Hospitals
Article first published online: 4 APR 2014
© 2014 Wiley Periodicals, Inc.
Journal of Economics & Management Strategy
Volume 23, Issue 2, pages 344–368, Summer 2014
How to Cite
Douven, R., Halbersma, R., Katona, K. and Shestalova, V. (2014), Vertical Integration and Exclusive Behavior of Insurers and Hospitals. Journal of Economics & Management Strategy, 23: 344–368. doi: 10.1111/jems.12056
- Issue published online: 4 APR 2014
- Article first published online: 4 APR 2014
We examine vertical integration and exclusive behavior in health care markets in which insurers and hospitals bilaterally bargain over contracts. We employ a bargaining model of two hospitals and two health insurers competing on premiums. We show that asymmetric equilibria exist in which one insurer contracts one hospital whereas the other insurer contracts both hospitals, even if all players are equally efficient in their production. Asymmetric equilibria arise if hospitals are sufficiently differentiated. In these cases, total industry profits increase and consumer welfare decreases in comparison to the case in which both insurers have contracts with both hospitals. Vertical integration makes these equilibria possible for a wider range of parameters.