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Physician Reimbursement, Time-Consistency and the Quality of Care

  • Robert Nuscheler

We use a model of horizontal and vertical differentiation to study physicians´incentives to provide quality in the physician-patient relationship under price regulation. If the price is the only regulatory variable, the social planner cannot implement the first-best policy. Moreover, the second-best policy is time-inconsistent. Excess entry and first-best efficient total quality provision are observed in the game without commitment. Allowing physicians to compete in prices does not solve the commitment problem, since the competitive solution coincides with the time-consistent outcome. In the median-voter equilibrium the time-consistency problem is more severe.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 159 (2003)
Issue (Month): 2 (June)
Pages: 302-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200306)159:2_302:prtatq_2.0.tx_2-o
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  1. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
  2. Jaskold Gabszewicz, J. & Thisse, J. -F., 1980. "Entry (and exit) in a differentiated industry," Journal of Economic Theory, Elsevier, vol. 22(2), pages 327-338, April.
  3. Franz Benstetter & Achim Wambach, 2001. "Strategic Interaction in the Market for Physician Services: The Treadmill Effect in a Fixed Budget System," CESifo Working Paper Series 427, CESifo Group Munich.
  4. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
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