Question

How does the role of market structures (monopolist vs. oligopolists) play a major role in the supply of healthcare providers to patients and consumers? Would there be one that is better over the other? Why or why not? How does asymmetric information play into market structure? Is this an advantage or disadvantage for healthcare firms? Why or why not?

Answer 1

Role of the market structure decides whether the firms are price takers or price setters. It decides the efficiency level to be achieved by the firms in the particular market structure and it affects the supply of health care providers to the consumers. For example, if market is perfectly competitive, the there is a productive and allocative efficiency, firms are price takers, making consumers pay lower price and there are huge number of service providers. But, in case of monopoly, there is only one firm supplying health care, at a higher price and in lower quantity to the consumers. So, from consumers perspective, perfectly competitive market is better than the monopoly market, as there are huge number of providers and customers can chose from, in perfectly competitive market. There is also a bargaining power. when there are few firms, then bargaining power is with them, but when there are huge number of providers, then bargaining power is with the consumers.

Asymmetric information restricts the supply of services to those consumers who have past medical history and are not disclosing the full information. It causes firms to charge higher price or premium for the health care services.  It is a disadvantage to the part of the firms, because they have to cater more claims if consumers hide the information and firms provide health care services.