Price dispersion in an online health marketplace: Evidence from telemedicine services in China

CHE RESEARCH BITES

By Jia Xiang, Terence C. Cheng, Hongqiao Fu, Winnie Yip

26 February, 2025

Countries, including Australia, have introduced price transparency initiatives to make healthcare cost information more accessible.  But are they working?

Price transparency efforts help people understand costs before treatment, encourage competition among providers, and aim to make healthcare more affordable. The Australian Government’s Medical Costs Finder allows patients to view typical costs for common medical procedures and hospital treatments.

To assess how price transparency initiatives can potentially affect healthcare prices, we examined one of China’s largest telemedicine platforms. This platform enables patients to easily compare providers and assess prices, user ratings, and physician characteristics. Given the ready availability of this information, we expected price variability for services to be low.

However, we find substantial unexplained price variation, even after taking into account factors like hospital reputation, location, patient ratings, and physician seniority. Prices for medical treatments where patients are less likely to have repeated consultations with providers, varied most.

These findings suggest that even with these online platforms, health consumers may struggle to accurately compare and track prices. They challenge the assumption that transparency alone ensures price convergence and underscore the need for additional policies to promote effective consumer choice and competition.

Find the original article: Xiang J, Cheng TC, Fu H, Yip W. Price dispersion in an online health marketplace: Evidence from telemedicine services in China, Economics Letters, 2024. https://doi.org/10.1016/j.econlet.2023.111435

Find out more about Economic Behaviour, Incentives and Preferences in Health.

CHE Research Bites are short, easy-to-understand summaries of our recent academic papers highlighting new evidence and insights on topical issues in the health and healthcare sectors.

Interested in hearing the latest from the Centre for Health Economics? Sign up to our newsletter. Follow us on X and LinkedIn.