QUALITY CHOICE AND MARKET STRUCTURE: A DYNAMIC ANALYSIS OF NURSING HOME OLIGOPOLIES | Zendy

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QUALITY CHOICE AND MARKET STRUCTURE: A DYNAMIC ANALYSIS OF NURSING HOME OLIGOPOLIES

Author(s) -

Lin Haizhen

Publication year - 2015

Publication title -

international economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 2.658

H-Index - 86

eISSN - 1468-2354

pISSN - 0020-6598

DOI - 10.1111/iere.12137

Subject(s) - oligopoly , quality (philosophy) , incentive , economic shortage , market structure , industrial organization , business , microeconomics , competition (biology) , economics , cournot competition , ecology , philosophy , linguistics , epistemology , government (linguistics) , biology

This article develops a dynamic model of entry and exit to analyze quality choice and oligopoly market structure in the nursing home industry. I find significant heterogeneity in the competitive effects across market structures: Firms of similar quality levels compete more strongly than dissimilar firms. Sunken entry costs are extremely large, and quality adjustment behavior is governed by significant fixed adjustment costs. A proposal to eliminate low‐quality nursing homes is found to cause a large supply‐side shortage, and another proposal to lower entry costs has offered a perverse incentive to provide low quality of care.

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