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Iris Kesternich, KULeuven Print
Tuesday, 09 October 2018, 14:00 - 15:15

Iris Kesternich, KULeuven

Entry decisions of not-for-profit and for-profit firms in the German long-term care market

Abstract: Historically, the German long-term care (LTC) market was dominated by not-for-profit nursing homes. As the result of a growing share of elderly within the population, the demand for nursing home services has increased substantially. This has led to a big wave of market entry by both for-profit and not-for-profit nursing homes. Using a rich administrative dataset on all LTC facilities in Germany, we examine the strategic interaction between these two ownership types. If not-for-profits and for-profits provide differentiated products, then competition will be stronger between firms of the same type. We model the entry decisions of both ownership types and obtain estimates on own- and other-type competitive effects using maximum likelihood. We find that the two types of nursing homes are imperfect substitutes and act as if they operate in two different market segments. Over time, the for-profits become more similar in terms of observables, but our estimates do not indicate a comparable convergence in behaviour. 

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