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ECS3710 ASSIGNMENT 2 SEMESTER 2 2024 Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced demand in South Africa. (10) Question 2: You are the manager of a private hospital that is part of an oligopoly in a local healthcare mar €3,71   In winkelwagen

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ECS3710 ASSIGNMENT 2 SEMESTER 2 2024 Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced demand in South Africa. (10) Question 2: You are the manager of a private hospital that is part of an oligopoly in a local healthcare mar

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ECS3710 ASSIGNMENT 2 SEMESTER 2 2024 Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced demand in South Africa. (10) Question 2: You are the manager of a private hospital that is part of an oligopoly in a local healthcare market. Using the kinked demand curve, demo...

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Table of Contents

Question 1: Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced
demand in South Africa. (10)................................................................................................. 6

Supplier-Induced Demand (SID) in South Africa ................................................................... 6

Main Issues Related to SID in South Africa ........................................................................... 6

Overtreatment and Overutilization of Services .................................................................. 6

Increased Healthcare Costs .............................................................................................. 6

Lack of Regulation and Monitoring .................................................................................... 7

Imperfect agency............................................................................................................... 7

Asymmetric Information..................................................................................................... 7

Medical Aid Schemes and SID .......................................................................................... 8

Impact on Health Outcomes .............................................................................................. 8

Question 2: You are the manager of a private hospital that is part of an oligopoly in a local
healthcare market. Using the kinked demand curve, demonstrate how you might respond to a
competitor’s decision to lower prices. What strategies would you use to maintain your market
share? (10) ........................................................................................................................... 9

Using the Kinked Demand Curve in an Oligopolistic Healthcare Market ................................ 9

Kinked Demand Curve ...................................................................................................... 9

Upper Segment of the Curve (Elastic Demand) ............................................................... 10

Lower Segment of the Curve (Inelastic Demand) ............................................................ 10

Responding to a Competitor’s Price Reduction ................................................................... 11

Avoid Price Matching ...................................................................................................... 11




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Enhance Non-Price Competition ..................................................................................... 11

Targeted Marketing and Branding ....................................................................................... 11

Patient Segmentation ...................................................................................................... 11

Branding as a Premium Service ...................................................................................... 11

Introduce Value-Added Services ..................................................................................... 12

Patient Convenience ....................................................................................................... 12

Improve Operational Efficiency........................................................................................ 12

Collaborate with Insurers................................................................................................. 12

Question 3: Imagine yourself as a hospital administrator faced with choosing to outsource the
hospital's cleaning services to an external company or continue using in-house staff. Apply
transaction cost economics to help you decide. (20) ........................................................... 12

Transaction Cost Economics Overview ........................................................................... 13

Bounded Rationality ........................................................................................................ 13

Opportunism ................................................................................................................... 14

Asset specificity............................................................................................................... 14

Application of TCE to the Decision ...................................................................................... 15

Production and Direct Costs................................................................................................ 15

Outsourcing..................................................................................................................... 15

Cost Reduction ............................................................................................................... 15

In-house .......................................................................................................................... 16

Labor management ......................................................................................................... 16

Flexibility ......................................................................................................................... 16



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