Impact of Electronic Auctions on Health Care Markets

Electronic auctions can be applied in certain markets, but the effects on market structure, market behaviour and market performance are unclear. We analysed the effects of a reverse electronic auction initiative, implemented by a new intermediary (CareAuction.nl), on the market for maternity care in the Netherlands in 2005 and 2006. After an unsuccessful start in 2004 as cybermediary in the care market between patients and care providers, CareAuction successfully moved in March 2005 to the care contracting market between insurance companies and care providers. We report on the effects of CareAuction on market performance (price of maternity care minus 2–4%), market structure (more care providers involved in the bidding processes) and market behaviour (bidding behaviours and user preferences). We conclude that IT and cybermediation result in the evolution of electronic markets, influenced by complex interactions among market structure, market conduct and market performance.