title: Optimal public rationing and price response.
abstract: We study optimal public health care rationing and private sector price responses. Consumers differ in their wealth and illness severity (defined as treatment cost). Due to a limited budget, some consumers must be rationed. Rationed consumers may purchase from a monopolistic private market. We consider two information regimes. In the first, the public supplier rations consumers according to their wealth information (means testing). In equilibrium, the public supplier must ration both rich and poor consumers. Rationing some poor consumers implements price reduction in the private market. In the second information regime, the public supplier rations consumers according to consumers' wealth and cost information. In equilibrium, consumers are allocated the good if and only if their costs are below a threshold (cost effectiveness). Rationing based on cost results in higher equilibrium consumer surplus than rationing based on wealth.
authors.affiliation: Faculty of Business and Economics, Department of Economics and Econometrics and Institut d'Economie et de Management de la Santé, University of Lausanne, Building Internef, CH-1015 Lausanne, Switzerland. Simona.Grassi@unil.ch
authors.forename: Simona
authors.initials: S
authors.lastname: Grassi
authors.forename: Ching-To Albert
authors.initials: CT
authors.lastname: Ma
mesh_terms: D002017:Budgets; D003258:Consumer Behavior; D003365:Costs and Cost Analysis; D017048:Health Care Costs; D015276:Health Care Rationing / Q000191:economics* / Q000379:methods; D019981:Health Care Sector / Q000458:organization & administration*; D006297:Health Services Accessibility / Q000191:economics*; D006801:Humans; D017059:Models, Econometric; D017149:Private Sector / Q000191:economics; D011634:Public Health / Q000191:economics