PubMed · 1125645
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R L Coppock, A J Cavenagh, K J Price, P J Snow, D E Shapland, K R Griffiths. 1975-03-15. Letter: A new service.. https://doi.org/10.1136/bmj.1.5958.629-e
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Two-tier charging, the practice of offering separate qualities of service at different prices, is a growing practice in public hospitals internationally. This paper models two-tier charging as a Stackelberg game in which the Ministry of Health leads by setting prices and a representative hospital follows by setting quality levels to maximise surplus in response. Whether or not two-tier charging will secure cross-subsidy from superior to basic service users depends on the own and cross-quality effects of the demand functions for the two services. Under a range of assumptions, the policy will evoke cross-subsidy from basic to superior services.
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