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Competition among Health Maintenance Organizations
Author(s) -
Encinosa William E.,
Sappington David E. M.
Publication year - 1997
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.1997.00129.x
Subject(s) - health maintenance , competition (biology) , business , market power , variety (cybernetics) , scale (ratio) , health care , economies of scale , actuarial science , economics , marketing , microeconomics , economic growth , geography , ecology , artificial intelligence , biology , monopoly , computer science , cartography
We develop a model of competition among health maintenance organizations (HMOs) to analyze the effects of market power, scale economies, and asymmetric knowledge of health risk on market outcomes. We find that competition among HMOs may, but need not, ensure socially preferred outcomes. Market power or scale economies can sometimes admit socially preferred outcomes when they would otherwise not arise. Asymmetric knowledge of health risk may or may not be constraining. When it is constraining, a variety of patterns of incomplete health insurance can arise, along with excessive or insufficient treatment and preventive care for either high‐risk or low‐risk individuals.