Xavier Martinez-Giralt

The Role of Information in Licensing Contract Design

Abstract This paper analyzes the contract terms of licensing agreements, based on a sample of contracts of transmission of technology between Spanish and foreign firms. It also presents a model that is in accordance with some stylized facts. We will focus our attention on the elements that explain the contract terms. In particular we analyze the consequences of the inclusion of know-how in the license agreement on the contract terms.

CAN PRICE COMPETITION DOMINATE MARKET SEGMENTATION

This note analyzes duopoly competition in a two stage (location-price) game, while allowing each f irm to establish a couple of outlets. Both the circle and the line mo del of spatial competition are considered. The main result is clear-c ut: in equilibrium neither firm will take up the opportunity of openi ng two stores. This is a warning that market segmentation, i.e., comp etition from multiple outlets, might not be attractive at all, becaus e it entails more intense price competition. Copyright 1988 by Blackwell Publishing Ltd.

Public and Private Provision of Health Care

One of the mechanisms that is implemented in the cost containment wave in the health care sectors in western countries is the definition, by the third-party payer, of a set of preferred providers. The insured patients have different access rules to such providers when ill. The rules specify the co-payments and the indemnity the patient obtains if patronizing an out-of-plan care provider. We propose to study the competitive process among providers in terms of both prices and qualities. Competition is influenced among other factors by the status of providers as in-plan or out-of-plan care providers. Also, we face a moral hazard of provider choice related to the trade-off between freedom to choose and the need to hold down costs. Our main findings are that we can define a reimbursement scheme when decisions on prices and qualities are taken simultaneously (that we relate to primary health care sectors) such that the first-best allocation is achieved. In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (specialized health care sector). We also derive some normative conclusions on the way price controls should be implemented in some European Union Member States. JEL Numbers: I11, I18

Preventive health care and payment systems

Abstract Prevention has been a main issue of recent policy orientations in health care. This renews the interest on how different organizational designs and the definition of payment schemes to providers may affect the incentives to provide preventive health care. We focus on the externality resulting from referral decisions from primary to acute care providers. This makes our analysis complementary to most works in the literature allowing to address in a more direct way the issue of preventive health care. The analysis is performed through a series of examples combining different payment schemes at the primary care center and hospital. When hospitals are reimbursed according to costs, prevention efforts are unlikely to occur. However, under a capitation payment for the primary care center and prospective budget for the hospital, prevention efforts increase when shifting from an independent to an integrated management. Also, from a normative standpoint, optimal payment schemes are simpler under joint management.

Negotiation advantages of professional associations in health care

In several instances, third-party payers negotiate prices of health care services with providers. We show that a third-party payer may prefer to deal with a professional association than with the sub-set constituted by the more efficient providers, and then apply the same price to all providers. The reason for this is the increase in the bargaining position of providers. The more efficient providers are also the ones with higher profits in the event of negotiation failure. This allows them to extract a higher surplus from the third-party payer.

Models of negotiation and bargaining in health care

In this scenario, negotiation over contractual terms, including prices as one major element, becomes a relevant issue in the analysis of performance of health care systems. Both empirical and theoretical analyses have been produced, and are reviewed below. This chapter reflects our views and preferences. It does not aim to be an encyclopaedic view of the existing literature on bargaining in health care. Instead, we try to highlight the new developments associated with explicit bargaining between third- party payers and providers of health care (a relation which is, in itself, only one of many that exist in the health care sector). Bargaining theory has a long tradition in the economics literature. However, it is only recently that this approach has found space in the analysis of the health care sector. The recognition of the strategic interaction among agents in the health care sector (patients, providers and third- party payers) came with the application of models borrowed from the industrial organization tradition dating from the 1970s. It was in the early 1990s when a step forward was taken with the eruption of the models of bargaining (see for example, Osborne and Rubinstein, 1990, for a nice presentation) In many situations the health care sector has the structure of a bilateral monopoly/oligopoly. In this context, bargaining becomes the natural way to approach the interactions among agents. Most economic analyses of contract design in health care in fact assume that the party that moves first, typically the payer, proposes a take- it- or- leave- it offer to the provider. We take here a broader view, looking at other types of negotiation procedures. We do not discuss issues related to contract design, which are taken up in chapter 22 by Chalkley in this Companion. We focus here on models of explicit bargaining between two parties, which we call the payer and the provider. On theoretical grounds, simple bargaining models can have their results transposed in a straightforward way: higher bargaining power and higher

On international cost-sharing of pharmaceutical R&D

Ramsey pricing has been proposed in the pharmaceutical industry as a principle to price discriminate among markets while allowing to recover the (fixed) R&D cost. However, such analyses neglect the presence of insurance or the fund raising costs for most of drug reimbursement. By incorporating these new elements, we aim at providing some building blocks towards an economic theory incorporating Ramsey pricing and insurance coverage. We show how coinsurance affects the optimal prices to pay for the R&D investment. We also show that under certain conditions, there is no strategic incentive by governments to set coinsurance rates in order to shift the financial burden of R&D. This will have important implications to the application of Ramsey pricing principles to pharmaceutical products across countries.

On brand proliferation with vertical differentiation

Abstract It is known that under horizontal differentiation whenever firms decide sequentially upon locations and prices, they give up the possibility of proliferation. We propose a spatial model of vertical differentiation to check the robustness of such an outcome to the specification of product differentiation.

Contractual design and PPPs for hospitals: lessons for the Portuguese model

Recently the Portuguese Government announced the launching of public–private partnerships (PPPs) to build hospitals with the distinctive feature that infrastructure construction and clinical activities management will be awarded to separate private parties. Also, one of the parties will be in charge of providing soft facilities. We explore alternative configurations of contracts and assess whether the equilibrium allocations attain the first-best solution.

Preferred Provider Market

When a third-party payer (be it a private insurer or a national health service) contracts with health providers, it may make special agreements with a subset of ‘preferred providers.’ Individuals affiliated to the third-party payer have a cheaper (or even free) access to these preferred providers than to other out-of-plan providers. This article analyzes how providers compete to become preferred providers.