Payment Mechanisms in the Healthcare Industry: An Experimental Study of Physician Incentives in a Multiple Principal Agent Setting
Current failures in the healthcare industry emphasize the need for a more fundamental understanding of how these contracts incentivize doctors. To aid this understanding, we treat the established physician-client-employer relationship as a multiple principal agent problem. We use a laboratory experiment, with a real-effort task, to test the relative performance of common payment mechanisms employed in this dual-principal agent relationship (Piece Rate, Flat Rate, Salary, Bonus, and Socialization). This study suggests, contrary to standard contract theory, that relying on extrinsic incentives to motivate physicians may be detrimental and costly for the healthcare industry.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Purnell Hall, Newark, Delaware 19716|
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
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.:
- Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
- Englmaier, Florian & Wambach, Achim, 2010.
"Optimal incentive contracts under inequity aversion,"
Games and Economic Behavior,
Elsevier, vol. 69(2), pages 312-328, July.
- Englmaier, Florian & Wambach, Achim, 2005. "Optimal Incentive Contracts under Inequity Aversion," IZA Discussion Papers 1643, Institute for the Study of Labor (IZA).
- Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
- Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007.
"Fairness and Contract Design,"
Econometric Society, vol. 75(1), pages 121-154, 01.
- Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2007. "Fairness and contract design," Munich Reprints in Economics 20618, University of Munich, Department of Economics.
- Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2005. "Fairness and Contract Design," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 67, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Gürtler, Marc & Gürtler, Oliver, 2012.
"Inequality aversion and externalities,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 84(1), pages 111-117.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985.
"Tournaments and Piece Rates: An Experimental Study,"
85-21, C.V. Starr Center for Applied Economics, New York University.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760.
- Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
- Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 201-28, Fall.
- Frank, Bjorn, 1998. "Good news for experimenters: subjects do not care about your welfare," Economics Letters, Elsevier, vol. 61(2), pages 171-174, November.
- Carola Frydman & Dirk Jenter, 2010.
NBER Working Papers
16585, National Bureau of Economic Research, Inc.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Gosden, Toby & Sibbald, Bonnie & Williams, Jackie & Petchey, Roland & Leese, Brenda, 2003. "Paying doctors by salary: a controlled study of general practitioner behaviour in England," Health Policy, Elsevier, vol. 64(3), pages 415-423, June.
- Dranove, David & Wehner, Paul, 1994. "Physician-induced demand for childbirths," Journal of Health Economics, Elsevier, vol. 13(1), pages 61-73, March.
- Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 120-137, May.
- Ching-to Albert Ma & Thomas G. McGuire, 1995.
"Optimal Health Insurance and Provider Payment,"
0059, Boston University - Industry Studies Programme.
- Cromwell, Jerry & Mitchell, Janet B., 1986. "Physician-induced demand for surgery," Journal of Health Economics, Elsevier, vol. 5(4), pages 293-313, December.
- Guth, Werner & Ockenfels, Peter & Wendel, Markus, 1993. "Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments with an Increasing Cake," International Journal of Game Theory, Springer;Game Theory Society, vol. 22(1), pages 51-73.
- Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:12-11.. 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: (Saul Hoffman)
If references are entirely missing, you can add them using this form.