Optimal Contracts and Contractual Arrangements Within the Hospital: Bargaining vs. Take-it-or-leave-it Offers
AbstractWe study the impact of different contractual arrangements within the hospital on the optimal contracts designed by third party payers when severity is hospital's private information. We develop a multi-issue bargaining process between doctors and managers within the hospital. Results are then compared with a scenario where doctors and managers decide independently by maximizing their own profit, with managers proposing to doctors a take-it-or leave-it offer. Results show that, when the cost of capital is sufficiently low, the informational rent arising on information asymmetry is higher in a set up where managers and doctors decide together through a strategic bargaining process than when they act as two decision-making units.
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Bibliographic InfoPaper provided by Centre for Health Economics, University of York in its series Working Papers with number 037cherp.
Length: 35 pages
Date of creation: May 2008
Date of revision:
Strategic Bargaining; Optimal Contracts; Hospitals; Asymmetric Information;
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-17 (All new papers)
- NEP-CTA-2008-05-17 (Contract Theory & Applications)
- NEP-HEA-2008-05-17 (Health Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chalkley, M. & Malcomson, J.M., 1995.
"Contracting for health services when patient demand does not reflect quality,"
Discussion Paper Series In Economics And Econometrics
9514, Economics Division, School of Social Sciences, University of Southampton.
- Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January.
- Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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