We present a model of optimal contracting between a purchaser and a provider of health services when quality has two dimensions. We assume that one dimension of quality is veri?able (dimension 1) and one dimension is not verifiable (dimension 2). We show that the power of the incentive scheme...

We study incentives for quality provision in markets where providers are motivated (semi-altruistic); prices are regulated and firms are funded by a combination of block grants and unit prices; competition is based on quality, and demand adjusts sluggishly. Health or education are sectors in...

Activity-based funding involves remunerating healthcare providers a fixed price per patient in each payment category. However, no categorisation system can account perfectly for differences in patient complexity. Differences may be systematic if providers routinely attract high-risk patients or...

We investigate the effect of competition on quality in regulated markets (e.g., health care, higher education, public utilities), using a Hotelling framework, in the presence of sluggish demand. We take a differential-game approach, and derive the open-loop solution (providers choose the optimal...

We investigate the effect of competition on quality in health care markets with regulated prices taking a differential game approach, in which quality is a stock variable. Using a Hotelling framework, we derive the open-loop solution (health care providers set the optimal investment plan at the...

Abstract We analyse the properties of optimal price adjustment to hospitals when no lump-sum transfers are allowed and when prices differ to reflect observable exogenous differences in costs. We find that: (a) when the marginal benefit from treatment is decreasing and the cost function is the...

In many markets, such as education, health care and public utilities, firms are often profit-constrained either due to regulation or because they have non-profit status. At the same time such firms might have altruistic concerns towards consumers. In this paper we study semi-altruistic firms’...

We study the relationship between competition and quality within a spatial competition framework where firms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including utility functions that are non-linear in income...

In many markets, such as education, health care and public utilities, firms are often profit-constrained either due to regulation or because they have non-profit status. At the same time such firms might have altruistic concerns towards consumers. In this paper we study semi-altruistic firms’...

We present a model of contracting between a purchaser of health services and a provider (a hospital). We assume that hospitals provide two alternative treatments for a given diagnosis: a less intensive one (for example, a medical treatment) and a more intensive one (a surgical treatment). We...