Journal of Applied Mathematics

  • J. Appl. Math.
  • Volume 2014, Special Issue (2013), Article ID 152060, 12 pages.

CSR Impact on Hospital Duopoly with Price and Quality Competition

Youguang Xu

Full-text: Open access

Abstract

This paper investigates the impact of corporate social responsibility (CSR) on hospital duopoly with price and quality competition. A CSR hospital is defined in this paper that cares about not only the profit but also the patient benefit. We start our analysis by establishing a two-stage Hotelling model with and without CSR. Results indicate that privatization mechanism may not be the best way of improving medical quality. Competition between hospitals with zero-CSR would lower the equilibrium qualities compared to the first-best level. So the coexistence of a public (more accurately, partial public) and a private hospital might be more efficient than a private-private hospital duopoly. During the competition with CSR in price and quality, social welfare level acts in accordance with an inverted U-shaped trajectory as CSR degree increases. The main reason lies in tha fact that optimal degree of CSR is determined by the trade-off between the benefit of quality improvement and the cost of quality investment. Numerical simulation shows that the optimal degree of CSR is less than a third.

Article information

Source
J. Appl. Math., Volume 2014, Special Issue (2013), Article ID 152060, 12 pages.

Dates
First available in Project Euclid: 1 October 2014

Permanent link to this document
https://projecteuclid.org/euclid.jam/1412177636

Digital Object Identifier
doi:10.1155/2014/152060

Zentralblatt MATH identifier
07010555

Citation

Xu, Youguang. CSR Impact on Hospital Duopoly with Price and Quality Competition. J. Appl. Math. 2014, Special Issue (2013), Article ID 152060, 12 pages. doi:10.1155/2014/152060. https://projecteuclid.org/euclid.jam/1412177636


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