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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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