Premium
Differentiation and Competition in HMO Markets
Author(s) -
Dranove David,
Gron Anne,
Mazzeo Michael J.
Publication year - 2003
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.0022-1821.2003.00209.x
Subject(s) - competitor analysis , competition (biology) , profitability index , product differentiation , health maintenance , business , industrial organization , economics , microeconomics , marketing , health care , biology , finance , ecology , cournot competition , economic growth
This paper examines how differentiation among Health Maintenance Organizations (HMOs) affects local market competition. Most markets for HMOs appear sufficiently unconcentrated; however, differences among HMOs may make competition less intense than the number of competitors would suggest. To investigate this possibility, we distinguish HMOs that serve only local markets from those that operate regional or national networks. We analyze how HMOs of one type affect the profitability of the other using an equilibrium model of entry and product choice. While the two types of HMOs have strong competitive effects within segments, the competitive effect of differentiated firms is negligible.