ABSTRACT
Imperfect competition covers a range of market structures from many firms to a few but, in contrast to perfect competition, relies on each firm facing a downward-sloping demand curve. This results from the relaxation of at least one of two perfect competition assumptions – homogeneous product or perfect information. Departure from perfect elasticity of the demand curve results from
The role of markets and competition in health care has been brought to prominence in the discussion of health sector reforms all around the world. In many countries there is a large volume of private health care activity. In others, reforms have introduced a greater role for market mechanisms within the public sector, an issue which is further discussed in Chapter 25. Understanding the theory of markets may help government to form appropriate regulatory-or incentive-based policies to ensure the appropriate operation of these markets. When a substantial private market exists in parallel with the public sector then forming public sector policies, which ignore the dynamics of the private market, would seem an unwise strategy.
