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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

IMPACT FACTOR 2017: 0.306
5-year IMPACT FACTOR: 0.492

CiteScore 2017: 0.50

SCImago Journal Rank (SJR) 2017: 0.414
Source Normalized Impact per Paper (SNIP) 2017: 0.531

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Volume 12, Issue 1


Volume 19 (2019)

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Volume 1 (2001)

Doctors' Remuneration Schemes and Hospital Competition in a Two-Sided Market

David Bardey / Helmuth Cremer / Jean-Marie Lozachmeur
Published Online: 2012-11-23 | DOI: https://doi.org/10.1515/1935-1682.3254


This paper studies the design of doctors' remuneration schemes. Two for-profit hospitals compete to attract patients and to affiliate doctors. The numbers of patients and doctors determine an hospital's quality level which is valued on both sides. Quality can be enhanced by doctors through a (costly) effort. We first consider pure salary, case payment or fee-for-service schemes on the doctors' side. Then, we study schemes that mix fee-for-service with either salary or case payments. We show that case payment schemes (either pure or in combination with fee-for-service) are more patient friendly than (pure or mixed) salary schemes. This comparison is exactly reversed on the doctors' side. Quite surprisingly, patients always lose when a fee-for-service scheme is introduced (pure or mixed). This is true even though the fee-for-service is the only way to induce the doctors to exert effort, and whatever the patients' valuation of this effort. In other words, the increase in doctors' effort brought about by the fee-for-service is more than compensated by the increase in fees faced by patients.

Keywords: two-sided markets; common network externality; providers’ remuneration schemes

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Published Online: 2012-11-23

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 12, Issue 1, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/1935-1682.3254.

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