M3: Asymmetric information, agency and supplier-induced demand
17 important questions on M3: Asymmetric information, agency and supplier-induced demand
Healthcare markets consist of three parties, which three? And what are the relationships between the three?
- Patient (principal) - provider (agent/GP)
- Provider - payer
- Patient - payer (insurer)
Under which condition will an increase in the number of providers lead to an increase in price?
- Medical care is a reputation good (consumer makes decision of using the good based on info from friends/family)
- The market is monopolistic competitive
One issue of principal-agent is moral hazard. Give three problems that come with moral hazard? And explain them.
- Ex ante: patients may take less preventive action due to insurance.
- Ex post: patients may use more, or more expensive, healthcare due to insurance.
- Provider/supplier induced demand: physicians may prescribe more, or more expensive, healthcare due to insurance.
- Higher grades + faster learning
- Never study anything twice
- 100% sure, 100% understanding
For my 1st exam I got a C. Then, I started looking for ways to learn better and I came across Study Smart. Since then I have scored a A+, A, A- and another A. I highly recommend it to everyone who wants to hear it. I am so happy with it!!
I was struggling to finish all my first-year subjects for 3 years. Then I discovered Study Smart, which helped me to finish all of them within 3 months.
Because of StudySmart, things are going well in many ways. Before, I always had study stress and no time for anything. Now I feel calm and confident (because of the program). I used to score a B, now I usually score an A or A+.
Hey Chris, I really want to thank you very much for developing the platform, I usually got around C for my exams, now I scored an A+, an A and a A- !!
Since using Study Smart, my average has increased significantly. I even completed a statistics course with a A+ while I'm bad at statistics. I took on extra courses this year, because of Study Smart. Thanks so much!
Ever since I started studying with StudySmart I passed all my exams !!! No more re-sits!! At first, I was happy with a pass and now I only get good grades. Many thanks!
I aced all the courses I studied with Study Smart. For law, I first scored a D, and now an A! I’m 100% sure that I’ll pass all the courses I study with Study Smart.
I always thought I studied well. My grades were fine. I could never have imagined that applying these study skills would have such a huge and direct impact on my grades, my speed and the pleasure I have in learning.
For the first time, I finally feel totally confident about the way I learn. I have the perfect overview and make great progress in terms of speed and the grades I get. Thanks, Chris!
I immediately started to enjoy learning again, and my grades soared. All of a sudden, everything went better. I highly recommend Study Smart to all students..
Being able to create my materials online made the process of studying so much smoother and quicker. I no longer have to spend a huge amount of my time on creating my summaries.
At first, my notes were a mess. Now I use Study Smart to take my notes in a perfectly structured way. It helps me to save a lot of time and do other things I enjoy.
Students that study with Study Smart get better grades. The system applies all the learning methods in such a way that both well-performing students and students who struggle perform much better.
Hi Chris, I would like to thank you very much. Last year I scored C on a course, and this year I got an A+ thanks to your method! Thank you very much!
The largest effect is that my child is more enthusiastic about school! Every parent wants their children to be happy at school, Study Smart made it happen.
In high school, I failed several exams, and that has really changed now. I actually needed this tool very much back then. Since I started studying with StudySmart, I haven't had any D's. My average score is now an A and those are results I would have never had in the past
With my old method, I passed only 3 out of 8 courses. Since I started taking my notes digitally in Study Smart, I have passed all my courses on the first try. For me, StudySmart takes away the stress of wondering if I will pass or not.
Thanks to StudySmart, I passed all my exams, and with better grades than before! On top of that, I have mastered a very good study method now, which I am confident will help me earn my degree.
How to prevent moral hazard?
Deductible
Co-payment
One issue of principal-agent is adverse selection. What is the problem that comes with this? And who is the agent and the principal?
result: elimination of the health insurance market
Agent: applicant for insurance
Principal: insurer
What is the lemon principle and the adverse death spiral?
Death spiral: insurance only pays for unhealthy because unhealthy remain and healthy drop out (don't buy insurance). The costs and the premium rise and we reach a circle. This leads to the adverse selection death spiral.
Which three problems arise with the principal-agent model?
- Moral hazard
- Adverse selection
- Supplier induced demand
A shift in the supply and demand curve. Which one shifts first in SID?
True of false?
SID is more likely when:
- Providers are paid on an FFS.
- Fees do not exceed marginal cost of providing extra services.
- Patients are not covered by health insurance
- Patients are free to choose a GP
- Ambiguity / risks in the diagnosis
- True
- False, more likely when fees exceed marginal costs
- False, more likely when patients are fully covered.
- True
- True
Give the utility model with tis inputs and the sign of each input.
Y = income, +
L = Leisure, +
SID = Supplier indcued demand, -
Who is the principal and who is the agent in asymmetric information and agency problems?
Name two strategies to reduce principal-agent problems.
- Reduce existing information asymmetries
- Align agent-principal interest
Study Douven et al. (2015) The effect of physician remuneration on regional variation in hospital treatments.
Result: Utilization rates higher in areas with more FFS physicians: After (indirectly) controlling for differences in health status Strong effect for supply sensitive treatment
Validity test: hip fracture treatment density not related to physician remuneration
In the theoretical model of SID, where do the financial incentives (FFS and capitation) lead to?
Capitation: evidence of underprovision
Study Rizzo & Zeckhauser (2003): Give the explanation of the target reference income in the theoretical model of SID
Examples of aligning agentprincipal interests
- Contract design (e.g. payment methods)
- Selection of agents
- Establish long-term relationships
- Reputation mechanism
- Peer pressure
- Codes of conduct / ethical constraint
- Presence of informed consumers
- Judicial claims / threat of malpractice suits
- Innovative payment mechanisms
- “Pay-for-performance” (P4P)
What is the agency theory?
Try our study magic for free
a PDF, study it super fast
- No sign up, email or credit card needed!
- AI makes unlimited flashcards
- Get unlimited quizzes and tests
- Ask AI anything
- No sign up, email or credit card needed!
- Have and keep perfect overview
- Make flashcards, notes and mind maps
- Review, test and score!
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
