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Asymmetric Information and Pooling Contracts in the Hospital Sector

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  • Michel Mougeot
  • Florence Naegelen

Abstract

Many regulators in health-care systems use pooling contracts such that payments do not depend on severity. This policy is motivated by concerns about moral hazard. In this paper, we show that this policy may be optimal because of nonresponsiveness when patients' severity is private information. We show in which cases the hospital may be nonresponsive to the regulator's objective under asymmetric information. We identify the necessary conditions under which pooling contracts are optimal, and we characterize the optimal fixed price and the optimal quantity of health services according to the value of the fixed costs.

Suggested Citation

  • Michel Mougeot & Florence Naegelen, 2014. "Asymmetric Information and Pooling Contracts in the Hospital Sector," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 365-386.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/093245614x13826128096866
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    Cited by:

    1. Izabela Jelovac & Samuel Kembou Nzale, 2017. "Regulation and Altruism," Working Papers halshs-01616193, HAL.
    2. Izabela Jelovac & Samuel Kembou Nzale, 2020. "Regulation and altruism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(1), pages 49-68, February.
    3. François Maréchal & Lionel Thomas, 2021. "The impact of medical complications on optimal hospital payment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1144-1173, December.

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