Efficiency and Service Quality in the Long-Term Care Services Market : A Case of Economies of Scale and Scope

Abstract

Since the marketization of long-term elder care services, the number of service providers seeking economies of scale and scope has increased. Economies of scale and scope represent cost efficiencies : while the former can be achieved by extending firm size, the latter can be achieved by expanding the product line to generate increase profits. Concerning long-term elder care services, the service-providing corporations can achieve economies of scale and scope by increasing the number of same-service providers and expanding the service fields to seek greater cost efficiencies. However, a trade-off occurs between efficiency and service quality when providing public services. Therefore, this study explores the advantages and disadvantages of seeking economies of scale and scope in the long-term elder care services markets by analyzing their effects on the performance of providers and on the quality of services for users. The results indicate that economies of scale and scope may create some efficiencies for the service providers. The results also indicate that emphasizing economies of scale and scope may involve some degree of sacrifice in the quality of service for users.