This paper examines the theoretical and empirical differences between the behavior of nonprofit and for-profit hospitals. Considerations are extended to include the possibility of collusion when hospitals make strategic choices. The operating objectives of the firms take into account price, quantity, and quality. Defining the quality of hospital care is discussed and applied to the empirical work. The model predicts nonprofit hospitals will provide a higher level of quality and a lower price than for-profit hospitals. Theoretically, under a collusive outcome for nonprofits, price will increase but the change in quality is indeterminate relative to a competitive, non-collusive outcome. The empirical section offers evidence of differences between nonprofit and for-profit hospital behavior. Nonprofit hospitals do provide higher quality and a lower price when compared to their for-profit rivals. It seems the competitive forces extend to the area of quality. There is evidence that increased competition between nonprofits fosters quality competition. From the for-profit perspective, quality competition appears to be provoked in markets where the for-profit competes more directly against nonprofits. This paper provides theoretical and empirical analyses of hospital interactions and how these interactions change depending upon the type of control. / Graduation date: 2001