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The physician-patient relationship as a game of strategic information transmission

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Author Info

  • Kris De Jaegher

    (Vrije Universiteit Brussel, Brussels, Belgium)

  • Marc Jegers

    (Vrije Universiteit Brussel, Brussels, Belgium)

Abstract

We show that the intuition underlying the supplier-induced demand (SID) hypothesis is reflected in the cheap-talk literature from game theory, and in the credence-good literature from the economics of information. Applying these theories, we conclude that a neoclassical version of the SID hypothesis is only relevant for treatment decisions involving an expensive treatment that is equally effective in curing several states, but efficient in curing only some of these states (in that a cheaper treatment is efficient otherwise). For a simple game involving such a treatment decision, we show that a Nash equilibrium exists where the patient is able to constrain the physician in inducing demand, without the market for the potentially induced treatment failing. This equilibrium allows us to derive comparative statistics and welfare results. Copyright © 2001 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.603
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 10 (2001)
Issue (Month): 7 ()
Pages: 651-668

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Handle: RePEc:wly:hlthec:v:10:y:2001:i:7:p:651-668

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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References

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  1. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  2. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  3. Sergiu Hart & Andreu Mas-Colell, 2000. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Econometrica, Econometric Society, vol. 68(5), pages 1127-1150, September.
  4. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May.
  5. Martin Gaynor, 1995. "Issues in the Industrial Organization of the Market for Physician Services," NBER Working Papers 4695, National Bureau of Economic Research, Inc.
  6. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
  7. De Jaegher, Kris & Jegers, Marc, 2000. "A model of physician behaviour with demand inducement," Journal of Health Economics, Elsevier, vol. 19(2), pages 231-258, March.
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  9. Weibull, Jörgen W., 1997. "What have we learned from Evolutionary Game Theory so far?," Working Paper Series 487, Research Institute of Industrial Economics, revised 26 Oct 1998.
  10. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  11. Matthews, Steven A. & Okuno-Fujiwara, Masahiro & Postlewaite, Andrew, 1991. "Refining cheap-talk equilibria," Journal of Economic Theory, Elsevier, vol. 55(2), pages 247-273, December.
  12. Rochaix, Lise, 1989. "Information asymmetry and search in the market for physicians' services," Journal of Health Economics, Elsevier, vol. 8(1), pages 53-84, March.
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  14. Grytten, Jostein & Carlsen, Fredrik & Sorensen, Rune, 1995. "Supplier inducement in a public health care system," Journal of Health Economics, Elsevier, vol. 14(2), pages 207-229, June.
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  16. Fuchs, Victor R., 2000. "The future of health economics1," Journal of Health Economics, Elsevier, vol. 19(2), pages 141-157, March.
  17. Paul Calcott, 1999. "Demand inducement as cheap talk," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 721-733.
  18. Labelle, Roberta & Stoddart, Greg & Rice, Thomas, 1994. "A re-examination of the meaning and importance of supplier-induced demand," Journal of Health Economics, Elsevier, vol. 13(3), pages 347-368, October.
  19. Hirshleifer, Jack, 1973. "Where Are We in the Theory of Information?," American Economic Review, American Economic Association, vol. 63(2), pages 31-39, May.
  20. Cheng Leonard K. & Zhu Min, 1995. "Mixed-Strategy Nash Equilibrium Based upon Expected Utility and Quadratic Utility," Games and Economic Behavior, Elsevier, vol. 9(2), pages 139-150, May.
  21. Pitchik, Carolyn & Schotter, Andrew, 1987. "Honesty in a Model of Strategic Information Transmission," American Economic Review, American Economic Association, vol. 77(5), pages 1032-36, December.
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Citations

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Cited by:
  1. F. Barigozzi & R. Levaggi, 2005. "New Developments in Physician Agency: the Role of Patient Information," Working Papers 550, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Arrieta, Alejandro, 2007. "A Structural Misclassifcation Model to Estimate the Impact of Physician Incentives on Healthcare Utilization," MPRA Paper 6718, University Library of Munich, Germany.
  3. Bin Xie & David M. Dilts & Mikhael Shor, 2006. "The physician-patient relationship: the impact of patient-obtained medical information," Health Economics, John Wiley & Sons, Ltd., vol. 15(8), pages 813-833.
  4. Marcello Montefiori & Marina Resta, 2009. "A computational approach for the health care market," Health Care Management Science, Springer, vol. 12(4), pages 344-350, December.
  5. Marcello Montefiori, 2008. "Information vs advertising in the market for hospital care," International Journal of Health Care Finance and Economics, Springer, vol. 8(3), pages 145-162, September.
  6. Barigozzi, Francesca & Levaggi, Rosella, 2008. "Emotions in physician agency," Health Policy, Elsevier, vol. 88(1), pages 1-14, October.
  7. Schottmüller, Christoph, 2013. "Cost incentives for doctors: A double-edged sword," European Economic Review, Elsevier, vol. 61(C), pages 43-58.
  8. Dmitry Lubensky & Eric Schmidbauer, 2013. "Physician Overtreatment and Undertreatment with Partial Delegation," Working Papers 2013-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  9. José Luis Lima R. & Javier Nuñez E., 2004. "Experimental Analysis of the Reputational Incentives in a Self Regulated Organization," Econometric Society 2004 Latin American Meetings 194, Econometric Society.
  10. K.J.M. De Jaegher, 2012. "The value of private information in the physician-patient relationship: a gametheoretic account," Working Papers 12-23, Utrecht School of Economics.
  11. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.

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