Quality incentives under a capitation regime: the role of patient expectations
AbstractWe model the interaction between patient uncertainty about qualityand switching costs in a market for primary care in which general practitioners(GPs) are paid from general taxation. GPs compete via theirquality which is initially imperfectly observed by patients. Patientsmay be sophisticated and know they may wish to switch GPs afterobserving their true quality; or they may be myopic and not realisetheir initial observations of quality are mistaken; or they make biasedestimates of quality. We examine the incentive e ects of capitationpayments under these three assumptions about patient expectations. We show that imperfect information and switching costs reduce qualityand dilute the incentive e ects of increases in the capitation feeirrespective of patient sophistication.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2000-07.
Date of creation: 01 Jan 2000
Date of revision:
Switching costs. Imperfect information. Quality. Capitation.;
Find related papers by JEL classification:
- I1 - Health, Education, and Welfare - - Health
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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.:
- Schmalensee, Richard., 1980.
"Product differentiation advantages of pioneering brands,"
1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
- Gravelle, Hugh & Masiero, Giuliano, 2000.
"Quality incentives in a regulated market with imperfect information and switching costs: capitation in general practice,"
Journal of Health Economics,
Elsevier, vol. 19(6), pages 1067-1088, November.
- Hugh Gravelle & Giuliano Masiero, . "Quality incentives in a regulated market with imperfect information and switching costs: capitation in general practice," Discussion Papers 00/18, Department of Economics, University of York.
- Riordan, Michael H, 1986. "Monopolistic Competition with Experience Goods," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 265-79, May.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
- Economides, Nicholas, 1993. "Quality variations in the circular model of variety-differentiated products," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 235-257, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEMM Working Papers).
If references are entirely missing, you can add them using this form.