Scandinavian Working Papers in Economics

HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

No 2019:2: Do physicians care about patients' utility? Evidence from an experimental study of treatment choices under demand-side cost sharing

Ge Ge (), Geir Godager () and Jian Wang ()
Additional contact information
Ge Ge: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway
Geir Godager: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway
Jian Wang: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

Abstract: We ask whether the physician's treatment choices are affected by demand-side cost sharing. In order to identify and quantify preferences under demand-side cost sharing, we design and conduct an incentivized laboratory experiment where only medical students are recruited to participate. In our experiment we achieve saliency of all three attributes of treatment alternatives, profit, health benefit and patient consumption: The choices in the laboratory experiment determine the amount of medical treatment and the future consumption level of a real patient admitted to the nearest hospital. In our experiment we vary demand-side cost sharing while preferences and bargaining power of the patient is fixed. We estimate decision-makers' preference parameters in a variety of random utility models. We find strong evidence suggesting that the amount of demand-side cost sharing affects medical decisions.

Keywords: Physician preferences; Demand-side cost sharing; Incentivized laboratory experiment

JEL-codes: C91; I11; J33

28 pages, May 13, 2019

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