Market Capacity Framework: An approach for identifying thin markets in the NDIS

Status: Completed December 2019

University, Research Partners:

Citation: Reeders, D., Carey, G., Malbon, E., Dickinson, H, Gilchrist, D., Duff G., Chand., S., Kavanagh, A. & Alexander, D. (2019). Market Capacity Framework. Centre for Social Impact: Sydney.

Research team: Associate Professor Gemma Carey, UNSW Sydney; Professor Helen Dickinson, UNSW Sydney; Professor Anne Kavanagh, University of Melbourne; Gordon Duff, National Disability Services; Professor David Gilchrist, University of Western Australia; Professor Satish Chand, UNSW Sydney; Dr Damon Alexander, Swinburne University, Eleanor Malbon, UNSW Sydney and Daniel Reeders, UNSW Sydney.

Markets are important to the success of the National Disability Insurance Scheme (NDIS). It is through diverse and robust disability markets that participants can exercise choice and control, thereby delivering on many of the goals of the scheme.

Yet we are seeing markets emerge with insufficient providers or capacity to meet demand and ensure competition takes place. This has led to debates about thin markets – a term used in various ways by different stakeholders to describe market deficiencies ranging from low numbers of providers, to immature markets, to market failure.

Market stewardship is essential to ensure that NDIS operates effectively. However, there is a lack of national or international evidence concerning how effective stewardship of markets should be operated or the types of levers that market stewards can use to address issues of thin markets.

Our research aims to develop a range of evidence-based interventions that will help markets to function effectively. To do this, we firstly need to define precisely what constitutes a thin market in the context of the NDIS.

Much of the existing literature relating to thin markets focuses on private sector markets, which lack some features that make the NDIS different. Firstly, NDIS markets are quasi markets (i.e. ones in which government plays important design roles) that have to carefully balance considerations of efficiency and effectiveness. Secondly the NDIS is not one market, but a complex system of markets.

In this report we develop the market capacity framework to support the identification of different types of thin markets. Within this framework we define two dimensions – sufficiency and diversity – and argue that the interaction of these gives rise to different types of thin markets.

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