Health Services As Credence Goods: A Field Experiment

Abstract

Information problems are a defining characteristic of health care markets. Despite their importance, there is little direct evidence of the impact of information problems between patients and physicians on the quality of treatment. Furthermore, the role of market conditions is not well understood. In this paper, we present the results from a field experiment in the market for dental care. A test patient who does not need treatment is sent to 180 dentists to receive treatment recommendations. In the experiment, we vary two factors: First, the information that the patient signals to the dentist. Second, we vary the perceived socioeconomic status (SES) of the test patient. Furthermore, we collected data to construct several measures of short- and long-term demand and competition as well as dentist and practice characteristics. We find that the patient receives an overtreatment recommendation in more than every fourth visit. A low short-term demand, indicating excess capacities, leads to significantly more overtreatment recommendations. Physician density and their price level, however, do not have a significant effect on overtreatment. Furthermore, we observe significantly less overtreatment recommendations for the patient with higher SES compared to lower SES under standard information. More signalled information however does not significantly reduce overtreatment.

Keywords: Health Care; Credence Goods; Overtreatment; Market Environment

JEL Classification: C93; D82; I11; L00