Strategic Costs and Preferences Revelation in the Allocation of Resources for Medical Treatments

19 Pages Posted: 15 Jul 2005

See all articles by Laura Levaggi

Laura Levaggi

Free University of Bozen - Faculty of Science and Technology

Rosella Levaggi

University of Brescia - Department of Economics and Management

Date Written: June 2005

Abstract

This article examines the resource allocation process in the internal market for health care and argue that the observed allocation is the result of the maximisation procedure of different agents, whose behaviour might not be fully detected by the system and whose preferences might not even enter the decision tree. Internal markets for health care foresee a separation between the purchaser and the provider which generates asymmetry of information. In this paper we analyse the strategic behaviour of the provider that by misrepresenting its cost and reservation utility might shift the allocation of resources away from the purchaser's objectives. Although the fundamental importance of equity an efficiency considerations that has been the traditional focus of the literature on the allocation of resources does not want to be denied, this paper shows that the organisation of production is not a neutral instrument and more research should be devoted to studying these effects.

Keywords: Internal market, asymmetry of information, devoted worker

JEL Classification: I11, I18

Suggested Citation

Levaggi, Laura and Levaggi, Rosella, Strategic Costs and Preferences Revelation in the Allocation of Resources for Medical Treatments (June 2005). Available at SSRN: https://ssrn.com/abstract=545584 or http://dx.doi.org/10.2139/ssrn.545584

Laura Levaggi

Free University of Bozen - Faculty of Science and Technology ( email )

Universitätsplatzt, 1
Bozen, 39100
Italy

Rosella Levaggi (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy
+39 03 0298 8825 (Phone)
+39 03 0298 8837 (Fax)

HOME PAGE: http://www.eco.unibs.it/segdse/rlev/index.htm