Nicos Savva

 

Professor Nicos Savva  [London Business School] 
Title Yardstick Competition for Service Systems
Date & Time Friday, October 28, 2016
Place UCLA Anderson School of Management 
Room TBD

 

Abstract
Yardstick competition is a regulatory scheme for local monopolists (e.g., hospitals), where the monopolist's reimbursement is linked to its performance relative to other equivalent monopolists. This regulatory scheme is known to work well in providing cost-reduction incentives and offers the theoretical underpinning behind the hospital prospective reimbursement system used throughout the developed world. This paper investigates how yardstick competition performs in service systems (e.g., hospital emergency departments), where, in addition to incentivizing cost reduction, the regulator's goal is to provide incentives to reduce customer waiting times. We show that i) the form of yardstick competition used in practice results in inefficiently long waiting times; ii) yardstick competition can be appropriately modified to achieve the dual goal of cost and waiting-time reduction, and present several extensions that help guide on how it could be used in practice.

Nicos Savva