The reaction of private physicians to price deregulation in France

French private physicians are paid on a fee-for-service basis and nearly all of them are under contract to the Social Security, which refunds part of the medical fee to the whole population. Previously the prices of medical services were fixed, but since 1980, a new option has been possible: a doctor can choose to fix the price of his services freely, provided he pays a higher social insurance contribution. But the amount refunded by Social Security does not vary, so that the consumer has to bear the extra charge. Our purpose here is to identify the factors that influence the physician's option. In Section 2, we define a model of the private physician's economic behaviour, of the classic income-leisure type. In Section 3, empirical tests are performed on a sample of observations in 95 'departements', gathering information about private GPs on the one hand, and the whole population on the other. According to our results, GPs' decisions depend on characteristics of both supply of and demand for GPs' services. One of our conclusions is that GPs seem to make up for low activity levels with higher prices, on condition the income of their practice allows it.