Survival of altruistic gatekeepers: Kickbacks in medical markets

Amann Erwin () and Felder Stefan ()
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Amann Erwin: University of Duisburg-Essen, Department of Business and Economics, 45127 Essen, Germany
Felder Stefan: University of Basel, Faculty of Business and Economics, 4002 Basel, Switzerland

German Economic Review, 2021, vol. 22, issue 1, 1-25

Abstract: Patients often rely on the advice of their general practitioner (GP) to decide which treatment best fits their needs. Hospitals, in turn, might influence GPs’ referral decision through kickbacks. We present a model with a monopolistic hospital and competitive GPs who vary in the degree of altruism towards their heterogeneous patients and show that an equilibrium without crowding out exists that separates GPs into referrers and care providers. Naïve patients visit purely selfish (referring) GPs, while rational patients sort themselves between the two groups of GPs. Finally, we investigate the scope for regulation, including an optimal coinsurance rate.

Keywords: Credence goods; kickbacks; price competition; crowding-out; rational vs. naïve consumers; coinsurance; optimal coinsurance (search for similar items in EconPapers)
JEL-codes: D47 D82 I11 I18 L50 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/ger-2020-0007

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