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Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment

Huck, S; Luenser, G; Spitzer, F; Tyran, J-R; (2016) Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment. Journal of Economic Behavior & Organization , 131 (B) pp. 78-105. 10.1016/j.jebo.2016.06.009. Green open access

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Abstract

In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians’ market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.

Type: Article
Title: Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jebo.2016.06.009
Publisher version: http://dx.doi.org/10.1016/j.jebo.2016.06.009
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Credence good, Physician, Overtreatment, Competition, Insurance
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1574102
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