Equilibrium provider networks: Bargaining and exclusion in health care markets

Kate Ho, Robin S. Lee

Research output: Contribution to journalReview articlepeer-review

53 Scopus citations


We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, "Nash-in-Nash with Threat of Replacement," that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer-optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer benefits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.

Original languageEnglish (US)
Pages (from-to)473-522
Number of pages50
JournalAmerican Economic Review
Issue number2
StatePublished - Feb 2019

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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