and Competition in HMO Markets
Dranove, D., Gron, A. and M. Mazzeo
This paper examines the effect of differentiation among Health
Maintenance Organizations (HMOs) on local market competition.
Most markets for HMOs appear to be sufficiently unconcentrated
when considered in aggregate; however, differences among HMOs
may allow for higher margins than one would expect given the
number of competitors. To investigate this possibility, we
divide HMOs into those that serve only the local area, and
those that serve a larger regional or national area. We then
analyze the extent to which one type of HMO affects the local
market structure of the other using an equilibrium model of
entry and product choice. We find that the two types of HMOs
have strong competitive effects within segments, but that
the competitive effect of differentiated firms is negligible.
and Competition in HMO Markets (PDF