Dynamic Hospital Competition Under Rationing by Waiting Times

54 Pages Posted: 25 Jul 2019

See all articles by Luís Sá

Luís Sá

University of Minho - Economic Policies Research Unit (NIPE)

Luigi Siciliani

University of York - Department of Economics and Related Studies

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2019

Abstract

We develop a dynamic model of hospital competition where (i) waiting times increase if demand exceeds supply; (ii) patients choose a hospital based in part on waiting times; and (iii) hospitals incur waiting time penalties. We show that, whereas policies based on penalties will lead to lower waiting times, policies that promote patient choice will instead lead to higher waiting times. These results are robust to different game-theoretic solution concepts, designs of the hospital penalty structure, and patient utility specifications. Furthermore, waiting time penalties are likely to be more effective in reducing waiting times if they are designed with a linear penalty structure, but the counterproductive effect of patient choice policies is smaller when penalties are convex. These conclusions are partly derived by calibration of our model based on waiting times and elasticities observed in the English NHS for a common treatment (cataract surgery).

Keywords: hospital competition, waiting times, patient choice, differential games

JEL Classification: C730, H420, I110, I180, L420

Suggested Citation

Sá, Luís and Siciliani, Luigi and Straume, Odd Rune, Dynamic Hospital Competition Under Rationing by Waiting Times (2019). CESifo Working Paper No. 7661, Available at SSRN: https://ssrn.com/abstract=3422243

Luís Sá (Contact Author)

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

Luigi Siciliani

University of York - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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