Do health insurers contract the best providers? Provider networks, quality, and costs

Jan Boone, Christoph Schottmueller*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


We provide a modeling framework to analyze selective contracting in the health-care sector. Two health-care providers differ in quality and costs. When buying health insurance, consumers observe neither provider quality nor costs. We derive an equilibrium where health insurers signal provider quality through their choice of provider network. Selective contracting focuses on low-cost providers. Contracting both providers signals high quality. Market power reduces the scope for signaling, thereby leading to lower quality and inefficiency.
Original languageEnglish
Pages (from-to)1209-1247
JournalInternational Economic Review
Issue number3
Publication statusPublished - Aug 2019


  • managed care
  • insurance
  • competition
  • equilibrium
  • incentives
  • markets
  • demand
  • plans

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