Competition and consumer choice in option demand markets

摘要

Two medical providers choose their geographic location and medical-care specialization, and then compete in prices under health insurance sales. When buying insurance consumers know their geographic address, but they do not know their preferred medical treatment before getting sick. Hence, consumers may desire buying access-options for both providers, although eventually attending only one. I show that location and product choices in such option demand markets greatly differ from those obtained for corresponding spot markets and may yields efficient, excessive, or insufficient level of consumer choice in terms of product differentiation and geographic dispersion. (C) 2016 Elsevier B.V. All rights reserved.