Mental health: market power and governance.

This paper is concerned with the pricing behaviour of providers of residential care for people with mental health problems. Two aspects of pricing were considered. First, are there differences between providers' market power and their actual mark-up rates (e.g. due to differences in motivation)? Second, do the different governance arrangements used in sectors of the industry, such as unified public and non-profit organisation and private bilateral contracting, affect pricing behaviour? A theoretical model was developed to underpin the empirical analysis of 496 residents in 112 mental health care facilities. Private, bilateral organisation was found to be associated with comparatively lower potential price-cost mark-up but a greater propensity to use this power to make profits/surpluses.