Optimal Contracts and Contractual Arrangements Within the Hospital: Bargaining vs. Take-it-or-leave-it Offers

Matteo Maria Galizzi () and Marisa Miraldo ()

No 037cherp, Working Papers from Centre for Health Economics, University of York

Abstract: We study the impact of different contractual arrangements within the hospital on the optimal contracts designed by third party payers when severity is hospital's private information. We develop a multi-issue bargaining process between doctors and managers within the hospital. Results are then compared with a scenario where doctors and managers decide independently by maximizing their own profit, with managers proposing to doctors a take-it-or leave-it offer. Results show that, when the cost of capital is sufficiently low, the informational rent arising on information asymmetry is higher in a set up where managers and doctors decide together through a strategic bargaining process than when they act as two decision-making units.

Keywords: Strategic Bargaining; Optimal Contracts; Hospitals; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: I11 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-hea
Date: 2008-05
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Persistent link: http://EconPapers.repec.org/RePEc:chy:respap:37cherp

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