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Imperfect Agency and the Regulation of Hospitals

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  • Mattias Lundb&aauml;ck

    (CEFOS, Göteborg University, Pilgatan 19A, S – 411 22 Göteborg, Sweden.)

Abstract

This article addresses the combined problem of imperfect agency and asymmetric information in the regulation of hospitals by modeling the physician as a utility maximizer with both the utility of patients and profit of the hospital as arguments in his or her utility function. The article concludes that optimal regulation of hospitals is based on three important factors: the doctor's marginal rate of substitution between profit of the hospital and utility of the patients, moral hazard in the relationship between the regulator and the hospital, and adverse selection in the same relation. The Geneva Papers on Risk and Insurance Theory (1997) 22, 151–168. doi:10.1023/A:1008620218204

Suggested Citation

  • Mattias Lundb&aauml;ck, 1997. "Imperfect Agency and the Regulation of Hospitals," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 22(2), pages 151-168, December.
    • Handle: RePEc:pal:genrir:v:22:y:1997:i:2:p:151-168
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