ABSTRACT
This chapter discusses the behaviour of firms and markets under intermediate forms of market structure. 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. The key feature of an oligopoly is that the decision made by one firm depends on the decisions made by other firms, that is, there is a high degree of interdependence between firms. A substantial part of the literature looks at collusion, where there is an explicit attempt by the different firms in the industry to coordinate their pricing and output strategies so that together they can reap monopolistic profits. The presence of asymmetrical information between producer and consumer may also give rise to forms of imperfect competition. An analysis of the Swiss health insurance market provides some support for the idea that too large a choice set deters consumers from searching for the lowest price.
