Question

In the text, phrases like “competitive advantage” and “upsetting the equilibrium” and “creating a difference” are used. All of these terms share a common thread. What is that thread and how does it apply in the health care arena?

Answer 1

The terms like competitive advantage, upsetting the equilibrium and creating a difference points towards the efficiency principle and thread of rationality that runs throughout the theories of economics.

The term competitive advantage implies a favorable business position of a company or business or organisation in terms of low prices, etc. A producer producing very efficiently enjoys competitive advantage over the other producers.

The equilibrium is upset when there is a mismatch between demand and supply in the economy. This mismatch can push the prices and quantity either up or down until the market is cleared. The point where market is cleared is the point of efficiency.

Creating the difference implies creating those products which will difference the producer from other producers. This will attract more consumers towards the producers.

As far as the health care industry is concerned, both efficiency and equity should play a role. The competitive advantage and differentiated products are important to manufacture better products at competitive prices. These incentives are important to engage the privatw players in continuous research and development.

That being said, the health care cannot be left to the market equilibrium entirely. This is because it is the role of state to provide healthcare to everyone in state. The pricing mechaism should not be used to exclude those who cannot pay for healthcare.

Hence, a mix of policies need to be adopted when it comes to healthcare. It cannot be left to the market and private players only as it involves the question of welfare.