Do physicians care about patients' utility? Evidence from an experimental study of treatment choices under demand-side cost sharing

We ask whether the physician's treatment choices are affected by demand-side cost sharing. In order to identify and quantify preferences under demand-side cost sharing, we design and conduct an incentivized laboratory experiment where only medical students are recruited to participate. In our experiment we achieve saliency of all three attributes of treatment alternatives, profit, health benefit and patient consumption: The choices in the laboratory experiment determine the amount of medical treatment and the future consumption level of a real patient admitted to the nearest hospital. In our experiment we vary demand-side cost sharing while preferences and bargaining power of the patient is fixed. We estimate decision-makers' preference parameters in a variety of random utility models. We find strong evidence suggesting that the amount of demand-side cost sharing affects medical decisions.