Template-Type: ReDIF-Paper 1.0

Author-Name: Philippe Chone
Author-X-Name-First: Philippe 
Author-X-Name-Last: Chone
Author-Email: chone@ensae.fr
Author-Workplace-Name: CREST-LEI and CNRS URA 2200


Author-Name: Ching-to Albert Ma
Author-X-Name-First: Ching-to Albert
Author-X-Name-Last: Ma
Author-Email: ma@bu.edu
Author-Workplace-Name: Department of Economics, Boston University

Title: Asymmetric Information from Physician Agency:Optimal Payment and Healthcare Quantity


Abstract: We model asymmetric information arising from physician agency, and its effect on the design of
payment and healthcare quantity. The physician-patient coalition aims to maximize a combination
of physician profit and patient benefit. The degree of substitution between profit and patient benefit
in the physician-patient coalition is the physician’s private information, as is the patient’s intrinsic
valuation of treatment quantity. The equilibrium mechanism depends only on the physician-patient
coalition parameter. Moreover, the equilibrium mechanism exhibits extensive pooling, with prescribed
quantity and payment being insensitive to the agency characteristics or patient’s actual
benefit. The optimal mechanism is interpreted as managed care where strict approval protocols are
placed on treatments.

Length: 38 pages
Creation-Date: 2005-02
Revision-Date:
Publication-Status:
File-URL: http://www.bu.edu/econ/workingpapers/papers/Albert%20MA/wp2005/PhysicianAgencyFeb2005.pdf
File-Function: 
Number: WP2005-006
Classification-JEL: D82, I1, I10, L15
Keywords: Physician Agency, Altruism, Optimal Payment, Healthcare Quantity, Managed Care
Handle: RePEc:bos:wpaper:WP2005-006