Research on the decision-making of duopoly public hospitals based on Hotelling model

Aiming at the actual situation in which patients significantly prefer medical service price and medical service quality, this article uses mathematical modeling and numerical simulation to researche the optimal decision-making of two hospitals in the medical market of duo-oligopoly public hospitals based on the theory of salience. It is found that in equilibrium, the two hospitals will make the same decisions on medical service price and medical service quality, and the optimal medical service quality and the optimal medical service price will decrease with the proportion of price-sensitive patients, and when the proportion of price-sensitive patients is less than half, the optimal medical service quality and the optimal medical service price increase with the degree of patient's salience thinking, the overall patient utility and the level of social welfare will increase as the degree of patient salience increases. By contrast, the optimal medical service quality and the optimal medical service price decrease with the degree of patient's salience thinking, the overall patient utility and the level of social welfare will first decrease and then increase as the degree of patient salience increases. This research can provide a reference for hospitals to decide on medical service price and quality.