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Physician Reimbursement, Time-Consistency and the Quality of Care

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  • Robert Nuscheler

Abstract

We use a model of horizontal and vertical differentiation to study physicians´incentives to provide quality in the physician-patient relationship under price regulation. If the price is the only regulatory variable, the social planner cannot implement the first-best policy. Moreover, the second-best policy is time-inconsistent. Excess entry and first-best efficient total quality provision are observed in the game without commitment. Allowing physicians to compete in prices does not solve the commitment problem, since the competitive solution coincides with the time-consistent outcome. In the median-voter equilibrium the time-consistency problem is more severe.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 159 (2003)
Issue (Month): 2 (June)
Pages: 302-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200306)159:2_302:prtatq_2.0.tx_2-o

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References

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  1. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
  2. Jaskold Gabszewicz, J. & Thisse, J. -F., 1980. "Entry (and exit) in a differentiated industry," Journal of Economic Theory, Elsevier, vol. 22(2), pages 327-338, April.
  3. Franz Benstetter & Achim Wambach, 2001. "Strategic Interaction in the Market for Physician Services: The Treadmill Effect in a Fixed Budget System," CESifo Working Paper Series 427, CESifo Group Munich.
  4. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
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Cited by:
  1. Brekke, Kurt R. & Nuscheler, Robert, 2003. "Gatekeeping in health care," Working Papers in Economics 10/03, University of Bergen, Department of Economics.
  2. Kurt R. Brekke & Roberto Cellini & Luigi Siciliani & Odd Rune Straume, 2010. "Competition and Quality in Regulated Markets with Sluggish Demand," CESifo Working Paper Series 2922, CESifo Group Munich.
  3. Hiroshi Aiura & Yasuo Sanjo, 2010. "Privatization of local public hospitals: effect on budget, medical service quality, and social welfare," International Journal of Health Care Finance and Economics, Springer, vol. 10(3), pages 275-299, September.
  4. Martin Gaynor, 2006. "What Do We Know About Competition and Quality in Health Care Markets?," NBER Working Papers 12301, National Bureau of Economic Research, Inc.
  5. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2011. "Hospital Competition and Quality with Regulated Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 444-469, 06.
  6. Brekke, Kurt Richard & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and Quality in Regulated Markets: a Differential-Game Approach," CEPR Discussion Papers 6801, C.E.P.R. Discussion Papers.
  7. Michael Kuhn & Carsten Ochsen, 2009. "Demographic and Geographic Determinants of Regional Physician Supply," Thuenen-Series of Applied Economic Theory 105, University of Rostock, Institute of Economics, Germany.
  8. Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, 03.
  9. Brekke, Kurt R. & Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2010. "Competition and quality in health care markets: A differential-game approach," Journal of Health Economics, Elsevier, vol. 29(4), pages 508-523, July.
  10. Hugh Gravelle & Rita Santos & Luigi Siciliani & Rosalind Goudie, 2012. "Hospital Quality Competition Under Fixed Prices," Working Papers 080cherp, Centre for Health Economics, University of York.

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