Does the market reward quality? Evidence from India

There are two salient facts about health care in low and middle-income countries; (1) the private sector plays an important role and (2) the care provided is often of poor quality. Despite these facts we know little about what drives quality of care in the private sector and why patients seek care from poor quality providers. We use two field studies in India that provide insight into this issue. First, we use a discrete choice experiment to show that patients strongly value technical quality. Second, we use standardized patients to show that better quality providers are not able to charge higher prices. Instead providers are able to charge higher prices for elements of quality that the patient can observe, which are less important for health outcomes. Future research should explore whether accessible information on technical quality of local providers can shift demand to higher quality providers and improve health outcomes.