Should developing countries ban dual practice by physicians? Analysis under mixed hospital competition

Abstract

Dual practice, where physicians work both in public and private hospitals, is a widely observed phenomenon, particularly in developing countries. This paper studies a multi‐stage game where hospitals compete for physicians as well as patients and, the service provided by physicians endogenously depends on the competitive setting in which hospitals operate. Specifically, we examine the impact of allowing dual practice on hospital payoffs, physician's service and societal welfare. We find that dual practice is socially desirable, since it softens the competition for physician's exclusive service while also increasing the amount of their service. However, if the degree of competition between the hospitals is significant, dual practice may not yield the highest payoffs for both public and private hospitals.