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Provider Competition in a Dynamic Setting

  • Marie Allard
  • Pierre Thomas Léger
  • Lise Rochaix

"We examine provider and patient behavior in a dynamic model where effort is noncontractible, competition between providers is modeled in an explicit way and where patients' outside options are solved for in equilibrium. Physicians are characterized by an individual-specific ethical constraint which allows for unobserved heterogeneity. This introduces uncertainty in the patient's expected treatment if he were to leave his current physician to seek care elsewhere. We also introduce switching costs and uncertainty in the treatment-outcome relationship. Our model generates equilibria with treatment heterogeneity, unstable physician-patient relationships, and overtreatment (a form of defensive medicine)." Copyright (c) 2009, The Author(s) Journal Compilation (c) 2009 Wiley Periodicals, Inc..

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Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 18 (2009)
Issue (Month): 2 (06)
Pages: 457-486

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Handle: RePEc:bla:jemstr:v:18:y:2009:i:2:p:457-486
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  1. Martin Gaynor & William B. Vogt, . "Antitrust and Competition in Health Care Markets," GSIA Working Papers 1999-E29, Carnegie Mellon University, Tepper School of Business.
  2. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
  3. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
  4. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
  5. Gal-Or, Esther, 1999. "Optimal Reimbursement and Malpractice Sharing Rules in Health Care Markets," Journal of Regulatory Economics, Springer, vol. 16(3), pages 237-65, November.
  6. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-98, April.
  7. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October.
  8. Danzon, Patricia M., 2000. "Liability for medical malpractice," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 26, pages 1339-1404 Elsevier.
  9. Rochaix, Lise, 1989. "Information asymmetry and search in the market for physicians' services," Journal of Health Economics, Elsevier, vol. 8(1), pages 53-84, March.
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