ENTRY DECISIONS AND ASYMMETRIC COMPETITION BETWEEN NONPROFIT AND FOR-PROFIT HOMES IN THE LONG-TERM CARE MARKET

Demand for long-term care services is growing strongly. Using a rich administrative data set for Germany, we examine strategic interaction between nonprofit and for-profit nursing homes. The estimated competitive effects imply that competition is much stronger within type, suggesting that they provide differentiated products. Over time, the entry behavior of for-profit homes has converged to that of the more established nonprofits and between-type competition has become stronger. Counterfactual simulations of proposed changes in government policy indicate that even moderate changes have a large impact on the fraction of markets that remain unserved or only served by a single type.