Provider payment incentives - Agency theory & models of physician behaviour - The physician's utility function
5 important questions on Provider payment incentives - Agency theory & models of physician behaviour - The physician's utility function
What is the standart theory of provider behaviour?
- This seems not fully applicable to physicians, e.g. because they do not exploit all possibilities to induce demand.
Possible explanations as to why physicians don't exploit all posibilities to induce demand? (2x)
- Physicians pursue a target income (they only induce demand until they achieve their target income).
- Physicians’ professional ethics (it mitigates the inclination to induce additional demand).
The McGyure & Pauly's model of physicians behaviour
- I = Income
- L = Leisure
- SID = Degree of supplier induced demand
I = m Q(SID): income is depended on the quantity of services provided. Q is influenced by SID and the average margin per service (m).
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The Rizzo & Zeckhauser's model of physician behaviour:
When z is positive the marginal utility is
What is the prospect theory?
- Below TI: high marginal utility of income
- Above TI: low marginal utility of income
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