Issues in the Industrial Organization of Health Markets
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2011
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ndltd-OhioLink-oai-etd.ohiolink.edu-osu13057655672021-08-03T06:02:41Z Issues in the Industrial Organization of Health Markets Pflum, Kevin E. Economics product sample idiosyncratic matching prescription drugs regulating quality asymmetric demand information asymmetric cost information contracting adverse selection moral hazard hospital bargaining <p>The first chapter develops a theoretical model of pharmaceutical sample dispensation. We know little about how samples are used and the reasons often presented in the medical literature do not have a solid economic foundation. The premise of this model is that sample dispensation developed to mitigate the risk of trying a drug that, due to extreme idiosyncrasy in the consumer-to-drug matching, may have no therapeutic value to a consumer. Consumers are rational and choose a drug to maximize their total, discounted expected utility. A firm's sampling strategy depends on the degree of information available in the market. When the efficacy is commonly known the sampling decision is not monotonic in a drug's efficacy. With asymmetric information, however, sample dispensation acts as a signal of efficacy and is monotonic. The signaling effect also causes the firm to dispense samples for lower efficacies than is optimal with symmetric information. The circumstances causing sampling to increase consumer welfare are explored.</p><p>The second chapter focuses on the problem of inducing socially preferred levels of quality when quality represents a dimension to a firm's good or service that cannot be directly contracted upon. The existing mechanism design literature on regulation treats quantity and quality as interchangeable or partially observable. I revisit a regulator's problem when a monopolist has superior knowledge of cost or demand which is responsive to unverifiable quality. Many markets possessing unverifiable quality often contain a mix of for-profit and not-for profit firms, therefore the firm's objective is modeled as a combination of profit- and output-maximization. In contrast to the earlier literature, the firm's ability to manipulate demand through quality can result in an under- or over-supply relative to first-best levels---even for a pure profit-maximizer. A firm's informational advantage may be completely attenuated, however, when the firm is an output-maximizer and the regulator pays directly for the good. The findings provide new insights into how the strategic response of the firm and consumers to the regulator's payment policy may lead to market distortions and what form these distortions take. </p><p>Finally, the third chapter examines the effect of hospital system membership on the bargaining outcome between a hospital and a managed care organization (MCO). Previous research has explored whether system hospitals secure higher reimbursement rates by exploiting local market concentration---or market power---to increase their value to MCO networks and negotiate a higher reimbursement rate. However, it is also possible that system hospitals are able to leverage their system membership in some way in the bargaining game to extract a higher percentage of their value to an MCO. Using data from California we find that system hospitals that are highly concentrated within a patient market both generate a higher surplus from contracting with a MCO and extract a higher proportion of the surplus. We also find that hospitals---particularly for-profits---belonging to systems operating in multiple patient markets have higher bargaining power and most of the price difference between system and non-system hospitals can be attributed to differences in bargaining power.</p> 2011-07-21 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1305765567 http://rave.ohiolink.edu/etdc/view?acc_num=osu1305765567 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
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NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Economics product sample idiosyncratic matching prescription drugs regulating quality asymmetric demand information asymmetric cost information contracting adverse selection moral hazard hospital bargaining |
| spellingShingle |
Economics product sample idiosyncratic matching prescription drugs regulating quality asymmetric demand information asymmetric cost information contracting adverse selection moral hazard hospital bargaining Pflum, Kevin E. Issues in the Industrial Organization of Health Markets |
| author |
Pflum, Kevin E. |
| author_facet |
Pflum, Kevin E. |
| author_sort |
Pflum, Kevin E. |
| title |
Issues in the Industrial Organization of Health Markets |
| title_short |
Issues in the Industrial Organization of Health Markets |
| title_full |
Issues in the Industrial Organization of Health Markets |
| title_fullStr |
Issues in the Industrial Organization of Health Markets |
| title_full_unstemmed |
Issues in the Industrial Organization of Health Markets |
| title_sort |
issues in the industrial organization of health markets |
| publisher |
The Ohio State University / OhioLINK |
| publishDate |
2011 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1305765567 |
| work_keys_str_mv |
AT pflumkevine issuesintheindustrialorganizationofhealthmarkets |
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