Strategic Costs and Preferences Revelation in the Allocation of Resources for Medical Treatments
19 Pages Posted: 15 Jul 2005
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: Suggested Citation
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