Hen 368 lecture 10 markets
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Hen 368 lecture 10 markets

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Hen 368 lecture 10 markets Hen 368 lecture 10 markets Presentation Transcript

  • Health EconomicsLecture 10Physician, Hospital, andPharmaceutical Markets
  • PerfectCompetitionMonopolisticCompetitionOligopoly MonopolyNumber ofFirmsMany Many Few OneType of Product Identical Different Similar UniqueEase of Entry Easy Easy Substantial BlockedDemand D = MR DynamicGameTheoryD > MRExamplesCommoditiesRiceApplesCell Phones UtilitiesGovernmentMarket Structure and Power0% 100%
  • EddieWillieBetraysWillie1YearSilentSilentBetraysEddie1YearEddieGoes FreeWillie10YearsWillieGoes FreeEddie10YearsWillie5YearsEddie5YearsPrisonersDilemma
  • Prisoners DilemmaPursuing the Dominant StrategyResults in Non-Cooperationand Leaves EveryoneWorse Off
  • Game TheoryRulesStrategiesPayoffs
  • John Nash(1928 - )Game TheoryNash EquilibriumNobel 1994A Beautiful Mind
  • DuoployTwo Sellers
  • 50 SR100 SRVerizon1,000100 SRAT&T1,00050 SRVerizon500Verizon2,000Verizon700AT&T2,000AT&T500AT&T7001. Reduce Price2. Sell more3. Increase profit
  • Physician MarketAsymmetric InformationJustifies GovernmentInterventionProtect the Public
  • Barriers to EntryEducationResidencyLicensing
  • QuantityPricePhysician MarketDemandSupplyQ2P2Q1P11. ReduceSupply2. IncreasePrice3. ReduceQuantity
  • Can the Market do a better jobof weeding-out incompetentphysicians than theGovernment?IncentivesBureaucrats vs. EntrepreneursWho decides?
  • Market IncentivesMedical LiabilityFor-Profit ProvidersBrand NamesEmployed Physicians
  • Government IncentivesBad reward for bad physiciansNo rewards for good physiciansBribesCannot be held liable - suedUnseen
  • Optimal Practice SizeEconomies of scale3 - 7 physicians
  • Supplier-Induced DemandDemandSupplyQ2P2Q1P11. Increase Demand 2. Increase Price 3. Increase Quantity
  • Malpractice InsuranceCompensateVictimsDeter MalpracticeDefensive Medicine