Efficient Market Conditiond

5 Confitions in the efficient economic market

perfect info, many buyers and sellers, zero transaction costs, homogeneous products and services, free entry and exit from the market

perfect information condition

an efficient market assumes that buyers know what they are purchasing what it costs and what alternatives exist

why healthcare breaks the perfect info

medical knowledge is uneven between patients and physicians and price information of service is withheld

many buyers and sellers condition

enough buyers and sellers that no participant can dictate prices

why healthcare breaks many buyers and sellers

hospitals merged to produce concentrated markets and most city areas are dominated by small number of health systems and small number of insurers and governmental programs pay on all patients behalf's

zero transaction costs condition

transaction is cost less

why healthcare breaks zero transaction costs

administravtice costs are in patients bills and insurance system makes transactions costly

condition of homogeneous products and services

require homogeneous products so competition occurs purely on price

why healthcare breaks homogeneous products and services

healthcare services vary by patient provider and setting and hospitals compete through reputation amenities and technology

free entry and exit condition

assume suppliers can enter when profits appear and exit when they disappear

why healthcare breaks free entry and exit from market

entry into healthcare restricted by licensing and selective admission to med school and residency, hospitals face capital requirements accreditation standards and certificate of need laws that require gov permission before adding facilities or major equipment, and exit is restricted for hospitals through support and funding

why american healthcare fails all

illness is unpredictable and frightening, medical knowledge is specialized, stakes at which someone receives healthcare is life or death