Abstract
Competitive bidding is gaining in popularity as a means of containing costs in indigent medical care programs. The economic implications of the bidding systems employed by Arizona and California are discussed in light of the existing literature. Two alternative bidding approaches are proposed for consideration by policymakers—the sealed bid ‘Vickrey’ auction and the ‘ascending Dutch’ auction. While the incentives it contains for providers are not optimal, the ascending Dutch auction has the greatest potential for effective implementation since it accomodates the realities of public sector budget constraints and political pressures for direct control over program expenditures.
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