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The Pricing of Primary Care Physicians' Services: A Test of the Role of Consumer Information

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  • Mark V. Pauly
  • Mark A. Satterthwaite

Abstract

This article empirically tests the theory that prices are affected by consumer information. It develops an empirical model (the increasing monopoly model) based on the notion that an increase in the number of sellers of a "reputation" good may cause price to increase because such an increase makes consumer search less efficient. The model is tested with data on the prices of primary care physicians' services in 92 SMSA's. The increasing monopoly model is found to be superior in explanatory power to a model based on the modified target income theory of physician pricing.

Suggested Citation

  • Mark V. Pauly & Mark A. Satterthwaite, 1981. "The Pricing of Primary Care Physicians' Services: A Test of the Role of Consumer Information," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 488-506, Autumn.
  • Handle: RePEc:rje:bellje:v:12:y:1981:i:autumn:p:488-506
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    Cited by:

    1. Schaffner, Florian, 2016. "Information transmission in high dimensional choice problems: The value of online ratings in the restaurant market," Annual Conference 2016 (Augsburg): Demographic Change 145585, Verein für Socialpolitik / German Economic Association.
    2. Stange, Kevin, 2014. "How does provider supply and regulation influence health care markets? Evidence from nurse practitioners and physician assistants," Journal of Health Economics, Elsevier, vol. 33(C), pages 1-27.
    3. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    4. David Bardey & Giancarlo Buitrago, 2015. "Integración vertical en el sector de la salud colombiano," DOCUMENTOS CEDE 014069, UNIVERSIDAD DE LOS ANDES-CEDE.
    5. Pan, Jay & Qin, Xuezheng & Li, Qian & Messina, Joseph P. & Delamater, Paul L., 2015. "Does hospital competition improve health care delivery in China?," China Economic Review, Elsevier, vol. 33(C), pages 179-199.
    6. Hugh Gravelle & Anthony Scott & Peter Sivey & Jongsay Yong, 2016. "Competition, prices and quality in the market for physician consultations," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 135-169, March.
    7. Benjamin Montmartin & Mathieu Escot, 2017. "Local Competition and Physicians’ Pricing Decisions: New Evidence from France," GREDEG Working Papers 2017-31, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    8. Vincze, János, 2010. "Miért és mitől védjük a fogyasztókat?. Aszimmetrikus információ és/vagy korlátozott racionalitás
      [Asymmetric information and/or bounded rationality: why are consumers protected and from what?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 725-752.
    9. repec:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0246-3 is not listed on IDEAS
    10. E. Sam Overman & Anthony G. Cahill, 1994. "Information, market government, and health policy: A study of health data organizations in the states," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 13(3), pages 435-453.
    11. Kyoungrae Jung, 2010. "Incentives for Voluntary Disclosure of Quality Information in HMO Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 183-210.
    12. Dwyer, Debra Sabatini & Liu, Hong, 2013. "The impact of consumer health information on the demand for health services," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 1-11.
    13. Andrew J. Epstein & Jonathan D. Ketcham & Sean Nicholson, 2010. "Specialization and matching in professional services firms," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 811-834.
    14. Stephen T. Parente & David Salkever & Joan DaVanzo, 2003. "The Role of Consumer Knowledge of Insurance Benefits in the Demand for Preventative Health," NBER Working Papers 9912, National Bureau of Economic Research, Inc.
    15. Flavio Delbono & Gemma Dipoppa & Luca Lambertini & Carlo Reggiani, 2017. "A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 465-478, December.
    16. Philippe Batifoulier, 1999. "Éthique professionnelle et activité médicale: une analyse en termes de conventions," Revue Finance Contrôle Stratégie, revues.org, vol. 2(2), pages 5-24, June.
    17. Alvin Headen, 1987. "Price discrimination in physician services markets based on race: New test of an old implicit hypothesis," The Review of Black Political Economy, Springer;National Economic Association, vol. 15(4), pages 5-20, March.
    18. Martin Gaynor, 1986. "Internal Non-Price Competition, Pricing, and Incentive Systems in the Cooperative Service Firm: The Case of US Medical Group Practice," NBER Working Papers 1866, National Bureau of Economic Research, Inc.
    19. Krishnan S. Anand & M. Faz{i}l Paç & Senthil Veeraraghavan, 2011. "Quality-Speed Conundrum: Trade-offs in Customer-Intensive Services," Management Science, INFORMS, vol. 57(1), pages 40-56, January.
    20. Carlton, Dennis W. & Perloff, Jeffrey M., 1989. "The Economics of Information," Research Reports 25156, University of Connecticut, Food Marketing Policy Center.
    21. Philippe Batifoulier & Nicolas Da Silva, 2014. "The economic behaviour of doctors: medical altruism without an ethic?," EconomiX Working Papers 2014-9, University of Paris Nanterre, EconomiX.
    22. Perronnin, Marc, 2013. "Effet de l'assurance complémentaire santé sur les consommations médicales, entre risque moral et amélioration de l'accès aux soins," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13659 edited by Wittwer, Jérôme.
    23. Laurence C. Baker, 1994. "Does Competition from HMOs Affect Fee-For-Service Physicians?," NBER Working Papers 4920, National Bureau of Economic Research, Inc.

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