Imperfect Quality Information in a Quality-Competitive Hospital Market

Posted by D. Daniel Sokol

Hugh Gravelle (National Primary Care Research and Development Centre, Centre for Health Economics, University of York) and Peter Sivey (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) investigate Imperfect Quality Information in a Quality-Competitive Hospital Market.

ABSTRACT: We examine the implications of policies to improve information about the qualities of profit seeking duopoly hospitals which face the same regulated price and compete on quality. We show that if the hospital costs of quality are similar then better information increases the quality of both hospitals. However if the costs are sufficiently different improved information will reduce the quality of both hospitals.