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Insurance in a Market for Credence Goods

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  • Kai Sülzle
  • Achim Wambach

Abstract

We study the impact of insurance on the amount of fraud in a physician-patient relationship. In a market for credence goods, where prices are regulated by an authority, physicians act as experts. Due to their informational advantage, physicians have an incentive to cheat by inducing inappropriate treatment levels. It is shown that a higher coinsurance rate may lead to either less fraud in the market and a lower probability of patients searching for second opinions or more fraud and more searches. We also show that a higher coinsurance rate corresponds with a higher level of physicians specialising.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 677.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_677

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Related research

Keywords: insurance fraud; credence goods; supplier induced demand;

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References

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  1. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
  2. Keith J. Crocker & John Morgan, 1998. "Is Honesty the Best Policy? Curtailing Insurance Fraud through Optimal Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 355-375, April.
  3. M-C. Fagart & P. Picard, 1998. "Optimal insurance under random auditing," THEMA Working Papers 98-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
  5. Lacker, J.M., 1989. "Optimal Contracts Under Costly State Falsification," Purdue University Economics Working Papers 956, Purdue University, Department of Economics.
  6. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
  7. Emons, Winand, 2001. "Credence goods monopolists," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 375-389, March.
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Citations

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Cited by:
  1. Jennifer Brown & Dylan B. Minor, 2012. "Misconduct in Credence Good Markets," NBER Working Papers 18608, National Bureau of Economic Research, Inc.
  2. Olivier Bonroy & Stéphane Lemarié & Jean-Philippe Tropeano, 2013. "Credence goods, experts and risk aversion," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00976890, HAL.
  3. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
  4. Wanda Mimra & Alexander Rasch & Christian Waibel, 2014. "Second Opinions in Markets for Expert Services: Experimental Evidence," CER-ETH Economics working paper series 14/192, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Uwe Dulleck & Rudolf Kerschbamer, 2007. "Experts vs. Discounters: Consumer Free Riding and Experts Withholding Advice in Markets for Credence Goods," Working Papers 2007-21, Faculty of Economics and Statistics, University of Innsbruck.
  6. Loukas Balafoutas & Rudolf Kerschbamer & Matthias Sutter, 2013. "Second-Degree Moral Hazard in a Real-World Credence Goods Market," Economics Working Papers ECO2013/08, European University Institute.
  7. Winand Emons, 2013. "Incentive-Compatible Reimbursement Schemes for Physicians," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 605-620, December.
  8. Vincze, János, 2010. "Miért és mitől védjük a fogyasztókat?. Aszimmetrikus információ és/vagy korlátozott racionalitás
    [Asymmetric information and/or bounded rationality: why are consumers protected and from
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 725-752.
  9. Dulleck, Uwe & Kerschbamer, Rudolf, 2005. "Experts vs Discounters: Competition and Market Unravelling When Consumers Do Not Know What they Need," CEPR Discussion Papers 5242, C.E.P.R. Discussion Papers.
  10. Nell, Martin & Schiller, Jörg, 2002. "Erklärungsansätze für vertragswidriges Verhalten von Versicherungsnehmern aus Sicht der ökonomischen Theorie," Working Papers on Risk and Insurance 7, University of Hamburg, Institute for Risk and Insurance.
  11. Alexander Rasch & Christian Waibel, 2013. "What drives fraud in a credence goods market? Evidence from a field study," CER-ETH Economics working paper series 13/179, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  12. Kyle Hyndman & Saltuk Ozerturk, 2008. "Consumer Information in a Market for Expert Services," Departmental Working Papers 0801, Southern Methodist University, Department of Economics.
  13. repec:cgr:cgsser:03-07 is not listed on IDEAS
  14. 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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