Quality Provision and Reporting When Health Care Services are Multi-Dimensional and Quality Signals Imperfect

48 Pages Posted: 7 Sep 2015

See all articles by Katharina Huesmann

Katharina Huesmann

University of Cologne - Faculty of Management, Economics and Social Sciences

Wanda Mimra

Catholic University of Lille - IESEG School of Management

Date Written: September 7, 2015

Abstract

We model competition for a multi-attribute health service where patients observe attribute quality imprecisely before deciding on a provider. High quality in one attribute, e.g. medical quality, is more important for ex post utility than high quality in the other attribute. Providers can shift resources to increase expected quality in some attribute. Patients rationally focus on attributes depending on signal precision and beliefs about the providers’ resource allocations. When signal precision is such that patients focus on the less important attribute, any Perfect Bayesian Nash Equilibrium is inefficient. Increasing signal precision can reduce welfare, as the positive effect of better provider selection is overcompensated by the negative effect that a shift in patient focusing has on provider quality choice. We discuss the providers’ strategic reporting incentives and reporting policies. Under optimal reporting, signals about the important attribute are always published. However, banning reporting on less important attributes might be necessary.

Keywords: multi-attribute good, quality signals, focusing, reporting

JEL Classification: I11, D83, L10

Suggested Citation

Huesmann, Katharina and Mimra, Wanda, Quality Provision and Reporting When Health Care Services are Multi-Dimensional and Quality Signals Imperfect (September 7, 2015). Available at SSRN: https://ssrn.com/abstract=2656962 or http://dx.doi.org/10.2139/ssrn.2656962

Katharina Huesmann (Contact Author)

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

Wanda Mimra

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

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