Abstract
This article examines the resources allocation process in the internal
market for health care in an environment characterised by asymmetry of
information. We analyse the strategic behaviour of the provider and show
how, by misreporting its cost function and reservation utility, it might
shift the allocation of resources away from the purchaser's objectives.
Although the fundamental importance of equity, efficiency and risk
aversion considerations which have been the traditional focus of the
literature on allocation of resources should not be denied, this paper
shows that contracts and internal markets are not neutral instruments
and more research should be devoted to studying their effects.
This article examines the resources allocation process in the internal
market for health care in an environment characterised by asymmetry of
information. We analyse the strategic behaviour of the provider and show
how, by misreporting its cost function and reservation utility, it might
shift the allocation of resources away from the purchaser's objectives.
Although the fundamental importance of equity, efficiency and risk
aversion considerations which have been the traditional focus of the
literature on allocation of resources should not be denied, this paper
shows that contracts and internal markets are not neutral instruments
and more research should be devoted to studying their effects.