The Corporate Demand For Insurance

“When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high? (Sultz & Young 336)”. It’s no surprise for many Americas today to realize that the cost of healthcare and the cost of having insurance is on the rise. Many people wonder why something stressed as important for every individual to have access to, is so expensive and inaccessible for many. So, why is that something that should be accessible for anyone, is lacking this quality? Many people today lack health insurance coverage, because of the high cost for private insurance or because of the loss of employer-based health coverage. Many Americans during the last decade, especially during the years of economic recession and contraction no longer have access to job-based health care insurance coverage (Sultz & Young 290). As a reaction to the many uninsured individuals and to attempt to control short and long term costs, the government had implemented the Patient Protection and Affordable Care Act.

An oligopolistic market is one that has several dominant firms with the power to influence the market they are in; an example of this could be the supermarket industry which is dominated by several firms such as Tesco, Sainsbury’s, and Waitrose etc... Furthermore an oligopolistic market can be defined in terms of its structure and its conduct, which involve various different aspects of economics.

The industry I’ve selected is the cellular phone service industry. This industry’s market structure is an oligopoly, meaning that a few large firms control the market. Four main firms, T-Mobile, AT&T, Sprint, and Verizon dominate the cell phone service industry. Although the four firms compete against one another, they typically avoid price competition in order to avoid price wars that decrease profits for all. Instead, they use other tactics, such as advertising and improved customer service to gain a higher demand in the market. Price wars occur due to the interdependence of firms involved in an oligopolistic market structure. A decision made by one firm to increase or decrease prices will lead to a fluctuation of the demand curve for the

Oligopolies are a type of market structure evident in Australia, which is comprised of 2 or more firms having a significant share of the market. In an oligopoly the few firms sell similar but differentiated or homogenous products and is characterised by a large number of buyers making it a form of imperfect competition. This market structure is evident through the Big Four Banks, Phone Industry - Vodafone, Optus and Telstra.

2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly?

In general, the level of competition in an industry increases with the number of firms in the industry. If all firms in an industry are small in size, relative to the size of the industry, it is a fragmented industry. If a small number of firms controls a large share of the industry’s output or sales, it is a consolidated industry.

Due to uncertainty, firms may want to ensure a stable amount of profit, collusion may be an option for them.

As illustrated by Sloman and Hinde (2007), an Oligopoly by nature has price stability, even when there has been no collusion between firms. This theory is based on two assumptions. For example, if Tate and Lyle were to lower their prices, British Sugar and the other rivals would feel the need to follow suit to prevent losing customers to Tate and Lyle. Contrastingly, if British Sugar raised their prices, Tate and Lyle would not follow suit. They would keep their prices the same and gain customers from British Sugar. The kinked demand model illustrates this.

I have learned that health care insurance coverage is an important issue for all the people living in the United States. In 1915 and 1920 the State tried to coordinated government health insurance, however it never took place. In the 1930s the federal level tried to coordinated government health insurance and the same thing happen, it never took place as well. Later on in the late 1930s people who were able form a health insurance coverage so they are able to protect themselves and their family due to high cost out-of-pocket co-payment. In 1965 Social Security Act adopted Medicare and Medicaid to provide health coverage services for children and mother thought-out the United States. I realize that Medicaid is mainly for needy people to help them get the best health care and to educate them to live a long and healthy life.

Read the Insurance Company ABC Inc. Participating Provider Agreement in this attachment. Assume that ABC, inc. has submitted this proposed contract to you in your capacity as chief negotiator for Independence Hospital. List at least three proposed changes which you would like to negotiate with ABC and explain your rationale for each change.

I agree that healthcare insurance is, in fact, an inelastic product. As you mentioned, people still choose not to be covered even though there is a cost of not having any insurance and it goes up each year and he or she is penalized. The theory you have for the different costs of over-the-counter medication is exactly how I see it. Medication costs different prices because of either the brand or mainly where it is sold. People seem to think if they buy the name brand that it is more effective than the generic and they are willing to pay the cost of it.

In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.

•Oligopoly: This is an industry with very little firms in the market. If they conspire, they weaken output and raise profits the way a monopoly would and should do. For example the mobile phone industry is an oligopoly what with so many companies for example Apple, LG and Samsung all competing together. Supermarkets are oligopoly’s as they make supernormal profits as well.

Therefore, all firms in the industry would suffer from a sharp fall in profits as they continuously cut prices to compete with each other. Eventually, prices will have to rise again to restore profitability and the firm that started the price war could have lost market share. Therefore firms want to avoid price competition as all firms will lose out in the long term due to reduced profits. So there is an incentive for firms to form a price agreement in order to reduce uncertainty.

In this case some big companies dominate the whole industry and as a result the small companies