Asymmetric information, ownership and quality of care: an empirical analysis of nursing homes

Abstract

Theoretically, when asymmetric information exists, nonprofit organizations, due to the attenuation of the property right, provide better quality of service than do the for-profits. Despite extensive theoretical examination of the behavior of nonprofits, there has been very little empirical testing of the plausibility of these theories. This article addresses the effect of ownership type on the quality of service in the nursing home industry, an environment particularly conducive to identifying the existence of asymmetric information. The study shows that the differences between for-profit and nonprofit homes do become manifest when asymmetric information is present.