Quality competition for screening and treatment services

Abstract

This paper examines how quality for one type of preventive health care services, screening services are determined under competition and explores its links with the treatment services. A Hotelling type of model is introduced for this purpose. Two providers offer both screening and treatment services, and decide on their quality for both services. The equilibrium quality values are characterized assuming providers are identical and patients are free to choose providers for screening and treatment independently. Screening quality and treatment quality are shown to be strategic complements. The social planner can achieve the desired quality level via appropriate reimbursements for screening and treatment of the disease at early and late stage. A sensitivity analysis investigates the effect of model parameters on the equilibrium quality levels.