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Bargaining and the Provision of Health Services

Author

Listed:
  • Luigi Siciliani
  • Anderson Stanciol
Abstract
We model and compare the bargaining process between a purchaser of health services, such as a health authority, and a provider (the hospital) in three plausible scenarios: a) the purchaser sets the price, and activity is bargained between the purchaser and the provider: activity bargaining; b) the price is bargained between the purchaser and the provider, but activity is chosen unilaterally by the provider: price bargaining; c) price and activity are simultaneously bargained between the purchaser and the provider: efficient bargaining. We show that: 1) if the bargaining power of the purchaser is high (low), efficient bargaining leads to higher (lower) activity and purchaser's utility, and lower (higher) prices and provider's utility compared to price bargaining. 2) In activity bargaining, prices are lowest, the purchaser's utility is highest and the provider's utility is lowest; activity is generally lowest, but higher than in price bargaining for high bargaining power of the purchaser. 3) If the purchaser has higher bargaining power, this reduces prices and activity in price bargaining, it reduces prices but increases activity in activity bargaining, and it reduces prices but has no effect on activity in efficient bargaining.

Suggested Citation

  • Luigi Siciliani & Anderson Stanciol, 2008. "Bargaining and the Provision of Health Services," Discussion Papers 08/28, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:08/28
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    References listed on IDEAS

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    Cited by:

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    3. Hange, Ulrich, 2015. "The Market for Nursing Homes in Germany: a spatial competition approach," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112853, Verein für Socialpolitik / German Economic Association.
    4. Andree Ehlert & Thomas Wein & Peter Zweifel, 2017. "Overcoming resistance against managed care – insights from a bargaining model," Health Economics Review, Springer, vol. 7(1), pages 1-15, December.
    5. Grepperud, Sverre & Pedersen, Pål Andreas, 2020. "Positioning and negotiations: The case of pharmaceutical pricing," European Journal of Political Economy, Elsevier, vol. 62(C).
    6. Eleonora Fichera & Hugh Gravelle & Mario Pezzino & Matt Sutton, 2012. "Specification of financial incentives for quality in health care contracts," Economics Discussion Paper Series 1218, Economics, The University of Manchester.
    7. ., 2012. "Models of Negotiation and Bargaining in Health Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 21, Edward Elgar Publishing.

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    More about this item

    Keywords

    bargaining. negotiation. purchasing.;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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