Can network analysis identify market problems in quasi‐markets? A proof‐of‐concept study on the National Disability Insurance Scheme

Abstract The use of markets has a long history in the delivery of social services. Market‐based arrangements are used worldwide with the goal of increasing choice, efficiency, and cost effectiveness in public service delivery. However, government‐run markets or ‘quasi‐markets’ do not behave as regular markets and therefore require interventions and stewardship in order to function efficiently and meet the social goals they aim to achieve. We assess the usefulness of functional network analysis (FNA) (a form of social network analysis) for identifying market gaps and market failure in quasi‐markets to assist governments in their stewardship roles. We test the utility of this approach within an Australian quasi‐market for disability services, where data were collected via surveys with disability providers in two case study sites. In this proof‐of‐concept study, data were analysed using FNA techniques. We find that FNA techniques can generate insights to identify quasi‐market problems. We find that FNA can be augmented with organisational characteristics such as size, profit margin, and ‘for profit’ status, enabling evaluation of the potential risks occurring within a particular quasi‐market structure. Points for practitioners Functional network analysis provides a method for identifying thin markets in quasi‐market systems such as the National Disability Insurance Scheme (NDIS). Authorities have not made data available regarding NDIS thin markets, so this research conducts a survey to replace data; however, the survey is incomplete and so must only be used as a proof of concept for the functional network analysis method. Functional network analysis provides promise for identifying thin markets in the NDIS.