We address the question of how a third-party payer (e.g. an insurer) decides what providers to contract with. Two different mechanisms are studied and their properties compared. A first mechanism consists in the so-called “any willing provider” where the third-party payer announces a contract and every provider freely decides to sign it or not. The second mechanism is the third-party payer setting up a bargaining procedure with both providers. The main finding is that the decision of the third-party payer depends on the surplus to be shared. When it is relatively high the third-party payer prefers the any willing provider system. When, on the contrary, the surplus is relatively low, the third-party payer will select a negotiated solution.
- health care provision,
- Any willing provider.
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