Author(s)

Jana Vyrastekova¹, Ferdy van Beest², Christiaan Lako³, Esther-Mirjam Sent¹

¹Department of Economics, Nijmegen Center for Economics, Institute for Management Research (IMR), Radboud University, Nijmegen, The Netherlands.
²Department of Financial Accounting and Reporting, Nyenrode Business University, Breukelen, The Netherlands.
³Department of Public Administration, Radboud University, Nijmegen, The Netherlands.

This paper addresses the coordination problem of price and quality setting insurers, arising on the health insurance market under regulated competition, as introduced, for instance, in the Netherlands in 2006. We use an experimental study to gain novel insights on the impact of the uncertainty about consumer preferences on the coordination problem. This fundamental uncertainty implies uncertainty about the identity of the payoff dominant equilibrium, while the risk dominant equilibrium is independent of the state of the world. The experimental results show that insurers are more likely to coordinate on the payoff dominant equilibrium under incomplete information. When insurers face not only strategic but also fundamental uncertainty in the coordination problem, they delay the response to the risk dominant strategy, and persist longer in trying to coordinate on the payoff dominant equilibrium. For the market we study, this implies that the co-ordination under incomplete information will result in consumers paying higher prices, in contrast to the original objectives of the regulated competition.

Health Insurance, Regulated Competition, Coordination, Information Concerning Consumer Preferences, Laboratory Experiment

Vyrastekova, J. , Beest, F. , Lako, C. and Sent, E. (2014) On the Role of Consumer Preferences in the Coordination among Health Insurers under Regulated Competition. Health, 6, 2854-2866. doi: 10.4236/health.2014.621324.