Strategic Sorting: The Role of Ordeals in Health Care

30 Pages Posted: 3 Jul 2019

See all articles by Richard J. Zeckhauser

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

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Date Written: June 28, 2019

Abstract

Ordeals are burdens placed on individuals that yield no direct benefits to others. They represent a dead-weight loss. Ordeals – the most common being waiting time – play a prominent role in health care. Their goal is to direct scarce resources to recipients receiving greater value from them, hence presumed to be more willing to bear an ordeal’s burden. Ordeals are intended to prevent wasteful expenditures given that health care is heavily subsidized, yet avoid other forms of rationing, such as quotas or pricing. This analysis diagnoses the economic underpinnings of ordeals. Subsidies to nursing home versus home care illustrate.

Keywords: ordeal, target efficiency, signaling, sorting, health care

Suggested Citation

Zeckhauser, Richard J., Strategic Sorting: The Role of Ordeals in Health Care (June 28, 2019). HKS Working Paper No. RWP19-023, June 2019, Available at SSRN: https://ssrn.com/abstract=3413760 or http://dx.doi.org/10.2139/ssrn.3413760

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