Oligopoly in Terms of the Us Health Insurance Industry
Sardor Yuldashev, WIUT, Economics with Finance, 2011
Content
1. Introduction 3
2. Competition in the US health insurance industry 3
3. Analysis of the US health insurance market structure 7
4. Strategies oligopoly firms use 8 4.1. Collusions, mergers and acquisitions 8 4.2. First-mover advantage 9 4.3. Punishment strategy 10
5. Pricing strategy and recommendations 11
6. Conclusion 12
7. Appendix 13
8. Bibliography 14
Introduction
The purpose of the coursework is to undertake a critical analysis and an assessment of the level of competition in the insurance industry of the country of our choice. In my case, I have decided to explore the health insurance industry of the United States. One of our aims is to determine and discuss the market structure and the change in the level of competition in the sub-sector. We are expected to discuss different strategies, such as first-mover advantage, punishment and collusion, companies use in order to be successful in the industry for maximizing their profits and earning desirable market share. In addition to this, we need to analyze pricing strategy the insurers use and give relevant suggestions considering the nature of the market.
Competition in the US health insurance industry
Insurance markets are considered as sufficiently competitive in the US, especially in healthcare. However, it does not mean that the industry is perfectly competitive. Compared to production of the other types of insurers, health insurance sub-industry products are less homogeneous, which derives our attention to its unusual market structure. Even though there is an intense competition in the sub-industry, barriers to entry are still high with soaring market concentration year by year as has been examined by many. In fact, we can even observe an existence of market dominants in certain geographic areas. These factors, to some extent, place us in a very interesting position, and therefore we rely on a critical
Content
1. Introduction 3
2. Competition in the US health insurance industry 3
3. Analysis of the US health insurance market structure 7
4. Strategies oligopoly firms use 8 4.1. Collusions, mergers and acquisitions 8 4.2. First-mover advantage 9 4.3. Punishment strategy 10
5. Pricing strategy and recommendations 11
6. Conclusion 12
7. Appendix 13
8. Bibliography 14
Introduction
The purpose of the coursework is to undertake a critical analysis and an assessment of the level of competition in the insurance industry of the country of our choice. In my case, I have decided to explore the health insurance industry of the United States. One of our aims is to determine and discuss the market structure and the change in the level of competition in the sub-sector. We are expected to discuss different strategies, such as first-mover advantage, punishment and collusion, companies use in order to be successful in the industry for maximizing their profits and earning desirable market share. In addition to this, we need to analyze pricing strategy the insurers use and give relevant suggestions considering the nature of the market.
Competition in the US health insurance industry
Insurance markets are considered as sufficiently competitive in the US, especially in healthcare. However, it does not mean that the industry is perfectly competitive. Compared to production of the other types of insurers, health insurance sub-industry products are less homogeneous, which derives our attention to its unusual market structure. Even though there is an intense competition in the sub-industry, barriers to entry are still high with soaring market concentration year by year as has been examined by many. In fact, we can even observe an existence of market dominants in certain geographic areas. These factors, to some extent, place us in a very interesting position, and therefore we rely on a critical
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