DEMAND INDUCEMENT AND THE PHYSICIAN/PATIENT RELATIONSHIP

David Dranove*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

126 Scopus citations

Abstract

The physician/patient relationship is a paradigm for any expert/client relationship. The physician both diagnoses the patient's illness and recommends a treatment. This dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits. These socially inefficient treatments correspond to the notion of “physician‐induced demand.” The level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient. This model offers several testable hypotheses, some of which are confirmed by related studies.

Original languageEnglish (US)
Pages (from-to)281-298
Number of pages18
JournalEconomic Inquiry
Volume26
Issue number2
DOIs
StatePublished - Jan 1 1988

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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