A market study of the New Zealand dental industry.
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Abstract
Despite consisting of many small dental practices, dentistry can be characterised as an imperfectly competitive market due to issues of imperfect and asymmetric information. Although ‘perfect competition’ is just a theoretical ideal, it provides a benchmark against which the state of competition can be assessed. Some deviations from perfect competition likely benefit consumers, such as heterogeneous goods; however, the imperfect and asymmetric information highly prevalent in dentistry is unlikely to provide the most conducive environment for effective competition. A potential ‘disruptor’ entered the market in 2005, Lumino The Dentists. Although Lumino has increased concentration in the industry by expanding through the acquisition of existing practices, which would normally lessen competition, the aforementioned information issues may have created an environment for an overall pro-competitive effect. The inaccessibility of dental services for many individuals has become more topical in recent years, making an investigation into the state of competition highly relevant. Yet, to my knowledge, no competition assessment of a market study type currently exists for dentistry. This paper carries out a theoretical discussion on the competitiveness of dentistry and implores a range of analyses to understand market share, price and quality in the market and how it has changed over time. It is highly likely that information issues in dentistry have constrained competition in the market; however, while some descriptive evidence exists in support, it cannot be definitively concluded that Lumino The Dentists has improved competition in the market.