Quality incentives in a regulated market with imperfect information and switching costs: capitation in general practice
AbstractWe model a system akin to the British National Health Service in which general practictioners (GPs) are paid from general taxation. GPs are horizontally and vertically differentiated and compete via their imperfect observed quality. We focus on the way in which patient uncertainty and switching costs interact and the implications for GP's choice of quality. We show that for any given capitation fee quality is lower and the incentive effects of the fee on quality are smaller. There are diminishing welfare gains from improving consumers information but increasing welfare gains from reducing switching costs. GPs do not act efficiently to improve consumer information via advertising or to reduce the costs of switching.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 00/18.
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Switching costs; Imperfect information; Quality; Product differentiation; Capitation; General Practice;
Other versions of this item:
- 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.
- I1 - Health, Education, and Welfare - - Health
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-04-04 (All new papers)
- NEP-IND-2000-04-11 (Industrial Organization)
- NEP-REG-2000-04-11 (Regulation)
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