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Separation of prescription and treatment in health care markets: A laboratory experiment

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  • Ben Greiner
  • Le Zhang
  • Chengxiang Tang

Abstract

Health care is a credence good, and its market is plagued by asymmetric information. In this paper, we use a laboratory experiment to test the performance of a potential remedy discussed in the applied literature, the separation of prescription and treatment activities. We observe a significant amount of overtreatment (and a smaller nonpredicted amount of undertreatment) in our baseline environment. Requiring a different than the treating physician to provide diagnosis and prescription for free is an effective way to reduce overtreatment in our laboratory setting. This effect, however, is partially offset by an increased frequency of undertreatment. Allowing prescription and treatment physicians to independently set prices for their services reduces efficiency due to coordination failures: In sum, prices are often higher than expected benefit of patients, who in turn do not attend to the physician. Also contrary to theory, bargaining power does not play a significant role for the distribution of profits between physicians.

Suggested Citation

  • Ben Greiner & Le Zhang & Chengxiang Tang, 2017. "Separation of prescription and treatment in health care markets: A laboratory experiment," Health Economics, John Wiley & Sons, Ltd., vol. 26(S3), pages 21-35, December.
    • Handle: RePEc:wly:hlthec:v:26:y:2017:i:s3:p:21-35
    DOI: 10.1002/hec.3575
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    References listed on IDEAS

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    Cited by:

    1. Balafoutas, Loukas & Kerschbamer, Rudolf, 2020. "Credence goods in the literature: What the past fifteen years have taught us about fraud, incentives, and the role of institutions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 26(C).
    2. Jeannette Brosig‐Koch & Burkhard Hehenkamp & Johanna Kokot, 2023. "Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics," Health Economics, John Wiley & Sons, Ltd., vol. 32(8), pages 1785-1817, August.
    3. Silvia Angerer & Daniela Glätzle-Rützler & ChristianWaibel, 2020. "Monitoring institutions in health care markets: Experimental evidence," Working Papers 2020-32, Faculty of Economics and Statistics, Universität Innsbruck.
    4. Finocchiaro Castro, Massimo & Guccio, Calogero & Romeo, Domenica, 2022. "A systematic literature review of 10 years of behavioral research on health services," EconStor Preprints 266248, ZBW - Leibniz Information Centre for Economics.
    5. Bruno Lanz and Evert Reins, 2021. "Asymmetric Information on the Market for Energy Efficiency: Insights from the Credence Goods Literature," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. Brosig-Koch, Jeannette & Groß, Mona & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2021. "Physicians' incentives, patients' characteristics, and quality of care: A systematic experimental comparison of fee-for-service, capitation, and pay for performance," Ruhr Economic Papers 923, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Waibel, Christian & Wiesen, Daniel, 2021. "An experiment on referrals in health care," European Economic Review, Elsevier, vol. 131(C).
    8. Silvia Angerer & Daniela Glätzle‐Rützler & Christian Waibel, 2021. "Monitoring institutions in healthcare markets: Experimental evidence," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 951-971, May.

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