UNCERTAINTY IN THE ECONOMICS OF MEDICAL DECISIONS

John Lane () and Sandro Tsang ()
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John Lane: London School of Economics, United Kingdom;
Sandro Tsang: Department of Economics, University of Granada, 18011 Granada, Spain

The Singapore Economic Review (SER), 2008, vol. 53, issue 01, 81-101

Abstract: A physician chooses not only the supply of medical treatment, contingent on the result of a diagnostic test, but also the quality of his service. Two sources of uncertainty are introduced. One source arises as, based on the patient's "apparent" symptoms, onlya prioriestimates of the likelihood of alternative medical conditions can be inferred. They can be improved upon by a diagnostic test, but inherent in such tests is the possibility of a "false positive". This second source of uncertainty is shown to be critical in the possible over- or undersupply of medical treatment. Remedial pricing structures are suggested.

Keywords: Bayesian analysis; analysis of health care markets (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1142/S0217590808002859

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