In Hong Kong, the Accident & Emergency (A&E) departments of public hospitals provide emergency services with a very low price of $100 for each attendance. It has been heavily subsidized by the government. As a result, patients should wait for a long time to see the doctor due to the service is over-demanded. In the meanwhile, private hospitals also provide emergency services and patients can be treated immediately, so the private hospitals are working within the capacity. Assume for simplicity that the emergency service fee in a private hospital is $1000. Is there a pricing policy that would have filled the capacity of the private hospital?

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Controlling health care costs requires that limits be placed either on prices quantiti... View the full answer