The Value of Rating Systems in Healthcare Credence Goods Markets

51 Pages Posted: 18 Nov 2021

See all articles by Silvia Angerer

Silvia Angerer

UMIT - Private University for Health Sciences, Medical Informatics and Technology

Daniela Glätzle-Rützle

University of Innsbruck - Department of Public Finance

Thomas Rittmannsberger

University of Innsbruck

Christian Waibel

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

Date Written: November 17, 2021

Abstract

In this paper, we experimentally investigate the effect of reputation and feedback on market outcomes in healthcare markets. Healthcare markets are characterized by asymmetric information between physicians and patients. Physicians have an information advantage over patients with respect to the appropriate treatment. They may exploit this advantage by providing either too little (undertreatment), too much (overtreatment), or may simply charge for services not rendered (overcharging). We investigate the effect of a feedback mechanism, in form of a five-star rating system, in two different market environments: a market with direct reputation and a market without direct reputation, i.e. a market that mimics a situation where patients and physicians have no prior experience with one another. We find that the effectiveness of the feedback mechanism heavily depends on market structures. Allowing patients to rate interactions with physicians in markets without direct reputation results in less physician misbehavior and improved market outcomes. However, in markets where patients are experienced and physicians can build a direct reputation, the implementation of a feedback mechanism does not enhance market outcomes, as these markets already operate at high levels of efficiency. Taken together, our results suggest that feedback mechanisms are most effective when patients have no experience with physicians but provide no additional benefits if patients have, and draw on personal experience.

Keywords: Credence goods, physician behavior, feedback, undertreatment, overcharging, laboratory experiment

JEL Classification: C91, D82, I11

Suggested Citation

Angerer, Silvia and Glätzle-Rützle, Daniela and Rittmannsberger, Thomas and Waibel, Christian, The Value of Rating Systems in Healthcare Credence Goods Markets (November 17, 2021). Available at SSRN: https://ssrn.com/abstract=3965318 or http://dx.doi.org/10.2139/ssrn.3965318

Silvia Angerer (Contact Author)

UMIT - Private University for Health Sciences, Medical Informatics and Technology ( email )

Eduard-Wallnöfer-Zentrum 1
Hall, Tirol 6060
Austria

Daniela Glätzle-Rützle

University of Innsbruck - Department of Public Finance ( email )

Innrain 52
Innsbruck, 6020
Austria

Thomas Rittmannsberger

University of Innsbruck ( email )

Innsbruck
Austria

Christian Waibel

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

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
125
Abstract Views
294
rank
315,974
PlumX Metrics