Vertical Restraints in Health Care Markets

36 Pages Posted: 26 Jan 2011 Last revised: 27 Jan 2011

See all articles by Rein Halbersma

Rein Halbersma

Dutch Healthcare Authority; Tilburg Law and Economics Center (TILEC)

Katalin Katona

Dutch Healthcare Authority; Tilburg Law and Economics Center (TILEC)

Date Written: January 26, 2011

Abstract

We analyze health care option demand markets with vertical restraints divided along two dimensions: naked and conditional exclusion, and vertical integration; applicable to the upstream, the downstream, and both markets. Our unified framework includes forward and backward integration, and joint ventures. We show that conditional exclusion has the same bargaining effects as vertical integration, but without the joint profit optimization. There are no individual incentives for exclusive dealing, but hospital-insurer pairs can find it jointly profitable to apply downstream vertical restraints on third parties. Outright downstream monopolization arises only when consumers have strong enough preferences for free provider choice.

Keywords: insurer-provider networks, vertical integration, exclusive

JEL Classification: G22, G34, I11, L14, L42

Suggested Citation

Halbersma, Rein and Katona, Katalin, Vertical Restraints in Health Care Markets (January 26, 2011). TILEC Discussion Paper No. 2011-005, Available at SSRN: https://ssrn.com/abstract=1748519 or http://dx.doi.org/10.2139/ssrn.1748519

Rein Halbersma (Contact Author)

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Katalin Katona

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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