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Supplier-Induced Demand and Quality Competition: An Empirical Investigation

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Author Info

  • W. David Bradford

    (University of New Hampshire)

  • Robert E. Martin

    (University of Texas, Arlington)

Abstract

The observable difference between "demand inducement" and "promotion" or "sales" is subjective and difficult to measure. Demand inducement has a pejorative connotation and is usually associated with significant asymmetric information. The evidence supporting the supplier-induced demand hypothesis in medicine is consistent with an alternate, more competitive hypothesis. Increasing competition may lead to higher service quality. If so, one could find a positive correlation between fees for service and the number of physicians in the community. This paper contains an empirical model that helps discriminate between these two competing hypotheses. We also provide empirical evidence on the role of income effects in the supplier induced demand debate suggested recently by McGuire and Pauly [1991].

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume21/V21N4P491_503.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 21 (1995)
Issue (Month): 4 (Fall)
Pages: 491-503

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Handle: RePEc:eej:eeconj:v:21:y:1995:i:4:p:491-503

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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Related research

Keywords: Medicine; Physician; Physicians;

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Cited by:
  1. De Jaegher, Kris & Jegers, Marc, 2000. "A model of physician behaviour with demand inducement," Journal of Health Economics, Elsevier, Elsevier, vol. 19(2), pages 231-258, March.
  2. LĂ©onard, Christian & Stordeur, Sabine & Roberfroid, Dominique, 2009. "Association between physician density and health care consumption: A systematic review of the evidence," Health Policy, Elsevier, Elsevier, vol. 91(2), pages 121-134, July.

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