DP6285 Competition and Waiting Times in Hospital Markets

Author(s): Kurt Richard Brekke , Luigi Siciliani , Odd Rune Straume

Publication Date: May 2007

Keyword(s): competition , hospitals , waiting times

JEL(s): H42 , I11 , I18 , L13

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP6285.asp.asp

This paper studies the impact of hospital competition on waiting times. We use a Salop-type model, with hospitals that differ in (geographical) location and, potentially, waiting time, and two types of patients; high-benefit patients who choose between neighbouring hospitals (competitive segment), and low-benefit patients who decide whether or not to demand treatment from the closest hospital (monopoly segment). Compared with a benchmark case of regulated monopolies, we find that hospital competition leads to longer waiting times in equilibrium if the competitive segment is sufficiently large. Given a policy regime of hospital competition, the effect of increased competition depends on the parameter of measurement: Lower travelling costs increase waiting times, higher hospital density reduces waiting times, while the effect of a larger competitive segment is ambiguous. We also show that, if the competitive segment is large, hospital competition is socially preferable to regulated monopolies only if the (regulated) treatment price is sufficiently high.