Quality and Investment Decisions in Hospital Care When Physicians are Devoted Workers

46 Pages Posted: 20 Jun 2005

See all articles by Michele Moretto

Michele Moretto

University of Padua, Dep of Economics and Management

Rosella Levaggi

University of Brescia - Department of Economics and Management

Vincenzo Rebba

University of Padua - Department of Economics

Date Written: June 2005

Abstract

This paper analyses the decision to invest in quality by a hospital in an environment where doctors are devoted workers, i.e. they care for specific aspects of the output they produce. We assume that quality is the result of both an investment in new technology and the effort of the medical staff. Hospital services are paid on the basis of their marginal cost of production while the number of patients treated depends on a purchasing rule which discriminates for the level and timing of the investment. We show that the presence of devoted doctors affects the trade-off between investment and the purchasing rule so that for the hospital it is not always optimal to anticipate the investment decision.

Keywords: Hospital technology, Devoted worker, Quality, Irreversible investment, Real options

JEL Classification: I11, D81

Suggested Citation

Moretto, Michele and Levaggi, Rosella and Rebba, Vincenzo, Quality and Investment Decisions in Hospital Care When Physicians are Devoted Workers (June 2005). Available at SSRN: https://ssrn.com/abstract=744604 or http://dx.doi.org/10.2139/ssrn.744604

Michele Moretto (Contact Author)

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Rosella Levaggi

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy
+39 03 0298 8825 (Phone)
+39 03 0298 8837 (Fax)

HOME PAGE: http://www.eco.unibs.it/segdse/rlev/index.htm

Vincenzo Rebba

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

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