Issues in the Industrial Organization of the Market for Physician Services

Martin Gaynor

No 4695, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What is the nature of the industrial organization of the market for physician services? Is the market 'competitive?' Are there pareto-relevant market failures, such that there is room for welfare improving policies? Economists have devoted a great deal of attention to this market, but it remains relatively poorly understood. Some background on early studies of this market is presented. The nature of the product being bought and sold, and of demand, are then characterized, in order to establish the character of this market. The key features of this market are that the product being sold is a professional service, and the pervasive presence of insurance for consumers. A professional service is inherently heterogeneous, non-retradable, and subject to an asymmetry of information between buyers and sellers. These characteristics are what bestow market power on sellers, further strengthened by the fact that consumers face only a small fraction of the price of any service due to insurance. The implications of this for agency relationships between patients and physicians, and insurers (both private and public) and physicians are then discussed. Agency relationships within physician firms are also considered. Both theoretical and empirical modelling of contracting between insurers and physicians and of the joint agency problems between patient and physician and insurer and physician are recommended as areas for future research. Since failures in this market are seen to derive largely from the structure of information, the potential gains from government intervention may be sharply circumscribed.

JEL-codes: I11 L80 (search for similar items in EconPapers)
Date: 1994-04
Note: EH
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Published as Journal of Economics and Management Strategy, Volume 3(1), Spring 1994, pp. 211-255

Downloads: (external link)
http://www.nber.org/papers/w4695.pdf (application/pdf)

Related works:
Journal Article: Issues in the Industrial Organization of the Market for Physician Services (1994)
Journal Article: Issues in the Industrial Organization of the Market for Physician Services (1994)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4695

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4695

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().