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Patient Dumping, Outlier Payment, and Optimal Healthcare Payment Policy under Asymmetric Information
Get PDFDecember 2013, Revised October 2014We analyze a rationale for official authorization of patient dumping in the prospective payment policy framework. We show that when the insurer designs the healthcare payment policy to let hospitals dump high-cost patients, there is a trade-off between the disutility of dumped patients (changes in hospitals’ rent extraction due to low-severity patients) and the shift in the level of cost reduction efforts for high-severity patients.We also clarify the welfare-improving conditions by allowing hospitals to dump high-severity patients. Finally, we show that if the effciency of the cost reduction efforts varies extensively and the healthcare payment cost is substantial, or if there are many private hospitals, the patient dumping policy can improve social welfare in a wider environment
Bertrand Competition under Network Externalities
Get PDFSeptember 2013, Revised May 2014Two sellers engage in price competition to attract buyers located on a network. The value of the good of either seller to any buyer depends on the number of neighbors on the network who consume the same good. For a generic specification of consumption externalities, we show that an equilibrium price equals the marginal cost if and only if the buyer network is complete or cyclic. When the externalities are approximately linear in the size of consumption, we identify the class of networks in which one of the sellers monopolizes the market,or the two sellers segment the market
General equilibrium dynamics with naïve and sophisticated hyperbolic consumers in an overlapping generations economy
Get PDFSeptember 2013, Revised January 2014Using an overlapping generations model, this paper describes interactions between naïve and sophisticated hyperbolic discounters in general equilibrium. The naïfs, who overestimate their future propensity to save and hence over-forecast the future equilibrium asset prices, are exploited through capital transactions by sophisticates, who correctly forecast the future asset prices by incorporating the naïfs’ mis-forecasts. Due to the capital losses, the naïfs fall into bankruptcy when they are highly present-biased, highly patient, and small in proportion. Under permissive conditions, the equilibrium is shown to be globally stable and Pareto inefficient in the ex-post sense
