The U.S. health-care sector is large and growing—health-care spending in 2011 amounted to $2.7 trillion and 18 percent of GDP. Approximately half of health-care output is allocated via markets. In this paper, we analyze the industrial organization literature on health-care markets, focusing on the impact of competition on price, quality, and treatment decisions for health-care providers and health insurers. We conclude with a discussion of research opportunities for industrial organization economists, including opportunities created by the U.S. Patient Protection and Affordable Care Act. (JEL J15, J24, J71, J81, K31)

This paper provides conditions under which the inequality constraints generated by either single agent optimizing behavior or the best response condition of multiple agent problems can be used as a basis for estimation and inference. An application illustrates how the use of these inequality constraints can simplify the analysis of complex behavioral models.