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Optimal Contracts and Contractual Arrangements Within the Hospital: Bargaining vs. Take-it-or-leave-it Offers

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Author Info
Matteo M Galizzi (Centre for Health Economics, University of York, UK and University of Brescia, Italy)
Marisa Miraldo (Centre for Health Economics, University of York)

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Abstract

We 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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File URL: http://www.york.ac.uk/inst/che/pdf/rp37.pdf
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File Function: First version, 2008
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Publisher Info
Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 037cherp.

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Length: 35 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:chy:respap:37cherp

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Related research
Keywords: 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:

References listed on IDEAS
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.:
  1. Jeffrey E. Harris, 1977. "The Internal Organization of Hospitals: Some Economic Implications," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 467-482, Autumn. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
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  3. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  4. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-25.


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