Abstract
A key characteristic of health care markets is the information asymmetry between patients and physicians. Physicians know more about the disease and the appropriate treatment than patients. This may result in different forms of physician misbehavior: providing more treatments than necessary, i.e. overtreatment; providing less treatment than necessary, i.e. undertreatment or charging more treatments than provided, i.e. overcharging. Patients have to trust in physicians that they receive appropriate treatment. This is why health services are often referred to as credence goods (Darby and Karni 1973, Dulleck and Kerschbamer 2006).
The provision of feedback on rating platforms and the associated reputation building has gained more and more attention in the past two decades in the context of physician-patient interactions. In Germany, for instance, about 70% of physician-rating website users are influenced by the rating in their physician choice (Emmert and Meszmer 2018).
Based on the credence goods framework established by Dulleck and Kerschbamer (2006) and Dulleck et al. (2011), we introduce a toy model that enables us to derive hypotheses and test them in a laboratory experiment. In total, three conditions of market interactions are planned with 144 undergraduate students either in the role of physicians or patients. In the baseline condition (B), no reputation building is possible between physicians and patients. In two rating conditions, we introduce the possibility to rate physicians on a rating scale between zero and five stars. The rating is based on the payoff information of patients resulting from the interaction between physician and patient. In the first rating condition (R-noComp), physicians observe their own public rating when they make their decisions, but not that of other physicians. In the second rating condition (R-Comp), physicians see their own public rating, as well as the public rating of other physicans.
Our design allows us to investigate the effect of a public rating mechanism on outcomes in healthcare credence goods markets. Furthermore, it enables us to explore whether strategic considerations regarding the relative ranking in the rating system influence physician behaviour.
References
Darby, M. R. and E. Karni (1973). "Free Competition and the Optimal Amount of Fraud." Journal of Law & Economics 16(1): 67-88.
Dulleck, U. and R. Kerschbamer (2006). "On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods." Journal of Economic Literature 44(1): 5-42. DOI: https://doi.org/10.1257/002205106776162717.
Dulleck, U., R. Kerschbamer and M. Sutter (2011). "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition." American Economic Review 101(2): 526-555. DOI: https://doi.org/10.1257/aer.101.2.526.
Emmert, M. and N. Meszmer (2018). "Eine Dekade Arztbewertungsportale in Deutschland: Eine Zwischenbilanz Zum Aktuellen Entwicklungsstand." Gesundheitswesen 80(10): 851-858. DOI: https://doi.org/10.1055/s-0043-114002.