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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. Emons, Winand, 1997. "Credence Goods Monopolists," Berkeley Olin Program in Law & Economics, Working Paper Series, Berkeley Olin Program in Law & Economics qt9c5508x4, Berkeley Olin Program in Law & Economics.
  2. Lacker, J.M., 1989. "Optimal Contracts Under Costly State Falsification," Purdue University Economics Working Papers 956, Purdue University, Department of Economics.
  3. Marie-Cécile Fagart & Pierre Picard, 1998. "Optimal Insurance Under Random Auditing," Working Papers, Centre de Recherche en Economie et Statistique 98-47, Centre de Recherche en Economie et Statistique.
  4. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(2), pages 399-415, May.
  5. 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.
  6. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, Elsevier, vol. 21(2), pages 265-293, October.
  7. 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, University of Chicago Press, vol. 106(2), pages 355-375, April.
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Citations

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Cited by:
  1. Dulleck, Uwe & Kerschbamer, Rudolf, 2009. "Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(1), pages 15-23, January.
  2. 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.
  3. Bonroy, Olivier & Lemarié, Stéphane & Tropéano, Jean-Philippe, 2013. "Credence goods, experts and risk aversion," Economics Letters, Elsevier, Elsevier, vol. 120(3), pages 464-467.
  4. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche, CIRPEE 1233, CIRPEE.
  5. Balafoutas, Loukas & Kerschbamer, Rudolf & Sutter, Matthias, 2013. "Second-Degree Moral Hazard in a Real-World Credence Goods Market," IZA Discussion Papers 7714, Institute for the Study of Labor (IZA).
  6. Kyle Hyndman & Saltuk Ozerturk, 2008. "Consumer Information in a Market for Expert Services," Departmental Working Papers 0801, Southern Methodist University, Department of Economics.
  7. Winand Emons, 2013. "Incentive-Compatible Reimbursement Schemes for Physicians," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 169(4), pages 605-620, December.
  8. repec:cgr:cgsser:03-07 is not listed on IDEAS
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. Dulleck, Uwe & Kerschbamer, Rudolf, 2005. "Experts vs Discounters: Competition and Market Unravelling When Consumers Do Not Know What they Need," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5242, C.E.P.R. Discussion Papers.
  14. Jennifer Brown & Dylan B. Minor, 2012. "Misconduct in Credence Good Markets," NBER Working Papers 18608, National Bureau of Economic Research, Inc.

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