Heterogeneous physicians, lawsuit costs, and the negligence rule
Real-world observations of negligent and defensive medicine challenge malpractice liability. Based on a principal-agent model with two types of physicians I show that lawsuit costs affect the patients' decision to sue and the physicians' level of care under the negligence rule, leading to a separated equilibrium in care. Given these conditions, punitive damages allow for a pooled equilibrium where all physicians exert first-best care. If courts cannot use punitive damages, a second-best solution arises with an optimal negligence standard that deviates from first-best care.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Peter A. Diamond, 1974.
"Single Activity Accidents,"
The Journal of Legal Studies,
University of Chicago Press, vol. 3(1), pages 107-164, January.
- 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.
- 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.
- Polinsky, A Mitchell & Shavell, Steven, 1989. "Legal Error, Litigation, and the Incentive to Obey the Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 99-108, Spring.
- Patricia M. Danzon, 1991.
"Liability for Medical Malpractice,"
Journal of Economic Perspectives,
American Economic Association, vol. 5(3), pages 51-69, Summer.
- Kessler, Daniel P. & McClellan, Mark B., 2002. "How liability law affects medical productivity," Journal of Health Economics, Elsevier, vol. 21(6), pages 931-955, November.
- Kaplow, Louis & Shavell, Steven, 1994.
"Accuracy in the Determination of Liability,"
Journal of Law and Economics,
University of Chicago Press, vol. 37(1), pages 1-15, April.
- Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May.
- Feess, Eberhard & Ossig, Sonja, 2007. "Reimbursement schemes for hospitals, malpractice liability, and intrinsic motivation," International Review of Law and Economics, Elsevier, vol. 27(4), pages 423-441, December.
- Henry S. Farber & Michelle J. White, 1991. "Medical Malpractice: An Empirical Examination of the Litigation Process," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 199-217, Summer.
- Edlin, Aaron S., 1994.
"Efficient standards of due care: Should courts find more parties negligent under comparative negligence?,"
International Review of Law and Economics,
Elsevier, vol. 14(1), pages 21-34, March.
- Aaron S. Edlin., 1993. "Efficient Standards of Due Care: Should Courts Find More Parties Negligent Under Comparative Negligence?," Economics Working Papers 93-218, University of California at Berkeley.
- A. Mitchell Polinsky & Yeon-Koo Che, 1991.
"Decoupling Liability: Optimal Incentives for Care and Litigation,"
NBER Working Papers
3634, National Bureau of Economic Research, Inc.
- A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
- Kessler, Daniel & McClellan, Mark, 2002. "Malpractice law and health care reform: optimal liability policy in an era of managed care," Journal of Public Economics, Elsevier, vol. 84(2), pages 175-197, May.
- Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:28:y:2008:i:1:p:78-88. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.