Chapter 15 Optimal Cooperation of Medical Care and Nursing Care in a Two-Region Spatial Model Tohru Naito Abstract This paper presents an analysis of the optimal cooperation of medical care service and nursing care service under two regions with an asymmetric density of patients. We apply Aiura and Sanjo (2010) by introducing cooperation between hospitals and nursing care facilities and analyze the effects of cooperation on the equilibrium medical service level, nursing care service level, optimal medical and nursing care fee, and social welfare. Results of the analysis show that the introduction of cooperation between hospitals and nursing care facilities increases social welfare, although it decreases the medical care service and nursing care service level in equilibrium. 15.1 Introduction Aging is an important issue to be addressed in economically developed countries. For example, the share of elderly persons 65 years old or older among the total pop- ulation in Japan exceeded 20% in 2005 and rose to 26.3% in 2015. Moreover, Japan has had a declining population since 2010, presenting difficulties of sustainability of the social security system. Although the medical expenditures of elderly people in 1985 were 389.88 billion yen, they increased to 144,927 billion yen in 2014 because the increase in medical expenditures for elderly people is constraining government finances. Meaningful fiscal improvement is not expected. Recently, the operation of an efficient medical system has, therefore, become necessary. When we acutely operate efficient medical care and nursing care systems, it is important to address the current circumstances of elderly people and patients using hospitals and nursing care facilities. For elderly people, the convenience of hospitalization is an important issue. Hospitals and nursing care facilities are not necessarily located in convenient T. Naito (B ) Doshisha University, Kyoto, Japan e-mail: tnaito@mail.doshisha.ac.jp © Springer Nature Singapore Pte Ltd. 2019 M. Hosoe et al. (eds.), Contemporary Issues in Applied Economics, https://doi.org/10.1007/978-981-13-7036-6_15 257