| Summary: | In industrialized countries there has been a long debate about the extent of market failure in health care. Recently similar concerns have arisen in developing countries as international organizations have advocated a greater role for the private sector. In many developing countries the private health care sector is already substantial, yet limited information is available about the behaviour of private providers. Empirical evidence is essential to the formulation of policies about and regulation of the private sector. This study explores the nature of hospital competition in Bangkok and in particular the impact which (i) problems of asymmetric information (ii) product differentiation and (iii) consumer behaviour have upon hospital competition. The nature of hospital competition is analysed directly through examining the impact of market concentration on prices, profitability, intensity and quality of care provided, and indirectly through a consideration of the underlying market conditions and institutions and their impact on competition. Direct evidence is sought through the analysis of a hospital database covering approximately forty hospitals in the Greater Bangkok area. The indirect evidence is based on a survey of consumer knowledge and behaviour in the Bangkok health care market, supported by interviews and document review. A substantial degree of both horizontal and vertical product differentiation is observed amongst hospitals in Bangkok. Consumers are relatively well-informed about differences between hospitals, willing to seek further information and quite sophisticated in their decision-making, however only limited price sensitivity is apparent. Non-price competition is dominant; hospitals facing higher competition have higher profitability and higher prices. Some evidence of both quality competition and supplier induced demand is found, but the study is inconclusive as to the extent of these. The findings support concerns in Thailand about the problems associated with a poorly regulated private health care sector and highlight the difficulties in regulating a very complex market such as that for hospital care.
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