Patients' Free Choice of Physicians Is Not Always Good

28 Pages Posted: 21 May 2019 Last revised: 31 Aug 2020

See all articles by Xinyu Li

Xinyu Li

University of Groningen

Christian Waibel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: February 28, 2020

Abstract

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

Li, Xinyu and Waibel, Christian, Patients' Free Choice of Physicians Is Not Always Good (February 28, 2020). Available at SSRN: https://ssrn.com/abstract=3376742 or http://dx.doi.org/10.2139/ssrn.3376742

Xinyu Li

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Christian Waibel (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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