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Charity, Competition, and the Pricing of Doctors' Services

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  • Roy J. Ruffin
  • Duane E. Leigh

Abstract

There are two basic explanations of price discrimination in medicine. The traditional explanation is that the American Medical Association enforces sufficient price discipline to apply the theory of a price-discriminating monopolist. Members of the AMA explain price discrimination by the operation of a charity. This paper develops a charity-competition model in which price discrimination emerges as a consequence of utility maximization by the individual doctor and the necessity of market equilibrium. It is shown that the charity model is more consistent with available empirical evidence than is the monopoly model.

Suggested Citation

  • Roy J. Ruffin & Duane E. Leigh, 1973. "Charity, Competition, and the Pricing of Doctors' Services," Journal of Human Resources, University of Wisconsin Press, vol. 8(2), pages 212-222.
    • Handle: RePEc:uwp:jhriss:v:8:y:1973:i:2:p:212-222
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    Cited by:

    1. Philippe Batifoulier & Nicolas Da Silva, 2014. "The economic behaviour of doctors: medical altruism without an ethic?," EconomiX Working Papers 2014-9, University of Paris Nanterre, EconomiX.
    2. Jeanne Lievaut & Philippe Batifoulier, 2011. "La transformation des actes gratuits en actes payants en médecine libérale. Une étude micro-économétrique longitudinale," EconomiX Working Papers 2011-12, University of Paris Nanterre, EconomiX.
    3. Martin Gaynor, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, March.
    4. Philippe Batifoulier & Nicolas Da Silva, 2014. "Medical Altruism in Mainstream Health Economics: Theoretical and Political Paradoxes," Review of Social Economy, Taylor & Francis Journals, vol. 72(3), pages 261-279, September.
    5. Baker, Laurence C. & Krueger, Alan B., 1995. "Medical costs in workers' compensation insurance," Journal of Health Economics, Elsevier, vol. 14(5), pages 531-549, December.
    6. Philippe Batifoulier, 1999. "Éthique professionnelle et activité médicale: une analyse en termes de conventions," Revue Finance Contrôle Stratégie, revues.org, vol. 2(2), pages 5-24, June.

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