Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18771
Authors: 
Malcomson, James M.
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1407
Abstract: 
Suppliers who are better informed than purchasers, such as physicians treating insured patients, often have discretion over what to provide. This paper shows how, when the purchaser observes what is supplied but can observe neither recipient type nor the actual cost incurred, optimal provision differs from what would be efficient if the purchaser had full information, whether or not the supplier can extract informational rent. The analysis is applied to, among other things, data on tests for coronary artery disease and to Medicare diagnosisrelated groups defined by the treatment given, not just the diagnosis, illustrating the biases in provision that result.
Subjects: 
supplier discretion
procurement
public provision
diagnosis-related groups
medicare
prospective payment
cost-effectiveness
JEL: 
I18
I11
H42
D82
Document Type: 
Working Paper

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