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Iris Kesternich (KU Leuven) – "Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market"

June 9, 2021 @ 12:15 pm - 1:30 pm

Microeconomics Seminar : 
Time: 12:15pm – 1:30pm
Date:  9th June 2021

Iris Kesternich (KU Leuven) – “Entry decisions and asymmetric competition between non-profit and for-profit homes in the long-term care market”

Abstract: Mostly due to population aging, the demand for long-term care (LTC) services is growing strongly. Historically, non-profit nursing homes dominated the German LTC market, but the recent entry wave was tilted towards for-profit competitors. Using a rich administrative dataset on all LTC facilities in Germany, we examine strategic interaction between these two ownership types in a static entry model. The estimates of competitive effects imply that non-profit and for-profit homes are substitutes, but competition is much stronger within-type, suggesting that they provide differentiated products. For-profit homes, in particular, act as if they operate in a different market segment, but over time their entry behavior has converged to that of the more established non-profits. Counterfactual simulations of proposed changes in government policy suggest a large impact on the fraction of markets that remain unserved or only served by a single type. Joint work with Iris Grant and Johannes Van Biesebroeck.


Roxana Fernandez Machado (CREST), Julien Combe (CREST), and Matias Nunez (CREST)