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Survival of altruistic gatekeepers: Kickbacks in medical markets

Author

Listed:
  • Amann Erwin

    (University of Duisburg-Essen, Department of Business and Economics, 45127 Essen, Germany)

  • Felder Stefan

    (University of Basel, Faculty of Business and Economics, 4002 Basel, Switzerland)

Abstract

Patients often rely on the advice of their general practitioner (GP) to decide which treatment best fits their needs. Hospitals, in turn, might influence GPs’ referral decision through kickbacks. We present a model with a monopolistic hospital and competitive GPs who vary in the degree of altruism towards their heterogeneous patients and show that an equilibrium without crowding out exists that separates GPs into referrers and care providers. Naïve patients visit purely selfish (referring) GPs, while rational patients sort themselves between the two groups of GPs. Finally, we investigate the scope for regulation, including an optimal coinsurance rate.

Suggested Citation

  • Amann Erwin & Felder Stefan, 2021. "Survival of altruistic gatekeepers: Kickbacks in medical markets," German Economic Review, De Gruyter, vol. 22(1), pages 1-25, February.
    • Handle: RePEc:bpj:germec:v:22:y:2021:i:1:p:1-25:n:1
    DOI: 10.1515/ger-2020-0007
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    More about this item

    Keywords

    Credence goods; kickbacks; price competition; crowding-out; rational vs. naïve consumers; coinsurance; optimal coinsurance;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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