Patients' Free Choice of Physicians Is Not Always Good
28 Pages Posted: 21 May 2019 Last revised: 31 Aug 2020
Date Written: February 28, 2020
We present a model on learning in health-care markets. Hospitals have junior physicians with low and senior physicians with high abilities. Junior physicians turn senior if they serve sufficiently many patients. Patients face heterogeneous costs for waiting once a physician's capacities are utilized. Hospitals choose to either allocate patients randomly to physicians or let patients choose their physicians. In a monopolistic market, the hospital always chooses the welfare-maximizing allocation system. In a competitive market, inefficiencies may arise due to two externalities. If patients are free to choose their physician, the marginal patient fails to internalize his impact on other patients' waiting-costs and on the learning of junior physicians.
Keywords: Health care markets, learning, quality, social welfare, regulation
JEL Classification: I11, I21, I30
Suggested Citation: Suggested Citation