How to Compensate Physicians When Both Patient and Physician Effort are Unobservable

Columbia University Department of Economics Working Paper No. 9900-01

34 Pages Posted: 19 Apr 2000

See all articles by Kenneth L. Leonard

Kenneth L. Leonard

University of Maryland

Joshua Graff Zivin

Columbia University - Department of Health Policy and Management; National Bureau of Economic Research (NBER)

Date Written: March 2000

Abstract

In this paper, we construct a joint production model of health with two-sided asymmetric information and ask the question, "How should physicians be compensated?" We demonstrate theoretically that the preferred physician compensation scheme depends on the illness condition. Outcome-contingent payments are better than effort--contingent payments for illnesses in which the efforts of physicians and patients are highly complementary, or in which both types of effort are important to the outcome. Effort-contingent payments are superior when efforts are not highly complementary, or when either physician or patient effort, but not both are important to the outcome. Evidence to support this theory is provided by an empirical analysis of patient choice of health care providers in Africa.

JEL Classification: D8, I1

Suggested Citation

Leonard, Kenneth L. and Zivin, Joshua Graff, How to Compensate Physicians When Both Patient and Physician Effort are Unobservable (March 2000). Columbia University Department of Economics Working Paper No. 9900-01, Available at SSRN: https://ssrn.com/abstract=219151 or http://dx.doi.org/10.2139/ssrn.219151

Kenneth L. Leonard (Contact Author)

University of Maryland ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States

HOME PAGE: http://faculty.arec.umd.edu/kleonard/

Joshua Graff Zivin

Columbia University - Department of Health Policy and Management ( email )

600 West 168th Street, 6th Floor
New York, NY 10032
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
188
Abstract Views
1,261
rank
177,934
PlumX Metrics