Qual Quant (2013) 47:2081–2093
A low quality–high cost–low satisfaction trap in public
health care: a model and an efﬁciency-quality-welfare
improving stochastic resolution
Published online: 29 November 2011
© Springer Science+Business Media B.V. 2011
Abstract This paper develops an applied stochastic model of public health care and shows
that the public health care sector in Turkey is plagued by a low quality–high cost–low sat-
isfaction trap which has been persistent over time. The values in question are shown to be
stochastically stable. We formulate an efﬁciency-quality-welfare improving stochastic policy
rule, which helps the sector to reach a selected target and which stabilizes quality, cost and
welfare around that target.
Keywords Stochastic equilibria · Quality · Health care sector
The service sector in general and the health care sector in particular have been the sub-
ject of an increasing number of scholarly investigations over the last 20 years. Among the
investigative works in question are Parasuraman et al. (1985, 1988, 1991), Oliver and Swan
(1989), Carman (1990), Babakus and Boller (1992), Rust and Zahorik (1993), Boulding et
al. (1993), Teas (1994), Dasu and Rao (1999), Koerner (2000), Lee et al. (2000), Li and
Collier (2000), Rust et al. (2000), Kara and Kurtulmu¸s (2004), Kara et al. (2003a,b), Kopalle
and Lehmann (2001), Sen (2002), Sendi et al. (2002), Costa and Garcia (2003), Kayis et
al. (2003), Stepanovich
(2004), Kara (2005, 2006, 2007a,b), Kara and Osman (2006), Caha
(2007)andRodriguez and Stoyanova (2008).
These works cover a wide array of issues ranging from the paradoxes of service quality
to the determination of optimal quality. The literature is indeed rich in scope and method,
and yet, it leaves large underdeveloped areas of inquiry that could be profitably explored.
An earlier draft of the paper was presented at the European Applied Business Research Conference,
Venice/Padova, Italy, June 2007. The draft in question, (Kara 2007b), was narrower in scope and did not
include the analysis of the issues associated with costs and welfare.
A. Kara (
Department of Economics, Istanbul Commerce University, Istanbul, Turkey