Monday, August 19, 2013
Competition in the market for supplementary health insurance: The case of competing nonprofit sickness funds
Posted by D. Daniel Sokol
Alexander Ellert, University of Hamburg and Oliver Urmann, University of Hamburg study Competition in the market for supplementary health insurance: The case of competing nonprofit sickness funds.
ABSTRACT: This paper examines the competition of nonprofit sickness funds in the market for supplementary health insurance. We investigate product quality strategies when quality is costly and the sickness funds are competing for customers. As long as the sickness funds choose the qualities for simultaneously, any equilibrium will be nondifferentiated. Only if total demand is increasing in quality, both sickness funds provide the maximum quality. For decreasing total demand the existence of an equilibrium depends on the consumers' sensitivity. If there is no equilibrium in the simultaneous competition, sequential quality competition leads to a differentiated equilibrium with a first mover advantage.