February 8, 2018

Competition and pricing behavior in long term care markets: Evidence from the Market for Assistance in Daily Housekeeping Activities

Exploiting a rich data set on the Dutch market for assistance in daily housekeeping activities (ADHA), we find that larger providers obtain a higher price than do small providers. However, compared to other studies on market power in care markets this price difference is considered small to moderate.

Our identification strategy relies on the exogenous variation in market shares in January ’07, the very first month after ADHA was decentralized to municipalities.  Zooming in on our main outcome, we obtain that the small but significant effect of market size on price is merely driven by the pricing behavior of for-profit providers.