Supplier Discretion Over Provision: Theory and an Application to Medical Care <link rel="stylesheet" typetext/css href="../toc/style.css"/> </head> <body> <table id="banner" width="100%" bgcolor="#FFFFFF" cellpadding="3" summary="t1"> <tbody> <tr> <td> <table width="100%" bgcolor="#3399CC" cellpadding="5" cellspacing="3" summary="banner"> <tbody> <tr> <td><p style="color: #ffffff;">The RAND Journal of Economics<br /> 1776 Main Street<br /> Santa Monica, CA 90401<br /> <br /> <br /> <p><a class="four" href="http://www.rje.org">Home</a> <a class="four" href="http://www.rje.org/contact.html">Contact Us</a> <a class="four" href="http://www.rje.org/search.html">Search</a></p></td> <td align="right" valign="top"> <h1>The RAND Journal<br /> of Economics</h1> </td> </tr> </tbody> </table> </td> </tr> <tr> <td> <table width="100%" bgcolor="#FFFFCC" summary="menu"> <tbody> <tr> <td class="one"><a class="one" href="http://www.blackwellpublishing.com/editors.asp?ref=0741-6261" target="new"> Editorial | </a> <a class="one" href="http://www.blackwellpublishing.com/journal.asp?ref=0741-6261&site=1" target="new">Forthcoming | </a><a class="one" href="/sup-mat.html">Supplementary Material | </a> <a class="one" href="https://editorialexpress.com/cgi-bin/rje_online.cgi?action=browse&tid=38330&sc=eQW1ucsi" target="new">Tables of Contents | </a><a class="one" href="http://www.blackwell-synergy.com/action/doUpdateAlertSettings?journalCode=RAND&action=addJournal" target="new">E-Table of Contents | </a><a class="one" href="/styleguide.html">Style Guide | </a><a class="one" href="/iolinks.html">IO Links </a></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <div class="navtrail"> <a href="/">RJE Home</a> </div> <div id="threecolumn"> <div id="leftcolumn"></div> <div id="rightcolumn"> <table width="100%" cellpadding="5" cellspacing="5" class="side_menu"> <tr> <td><a class="four" href="http://editorialexpress.com/rand" target="new">Online Submissions</a></td> </tr> <tr> <td><a class="four" href="/subs.html">Online Access</a></td> </tr> <tr> <td><a class="four" href="http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi" target="new">Order PDFs</a></td> </tr> <tr> <td><a class="four" href="http://www.blackwellpublishing.com/subs.asp?ref=0741-6261" target="new">Subscribe/Renew</a></td> </tr> <tr> <td><a class="four" href="/nobel.html">Nobel Laureates</a></td> </tr>  </table> </div> <div id="content">  <h1> Supplier Discretion Over Provision: Theory and an Application to Medical Care <p></h1><hr> <strong>Volume:</strong> Volume 36, No. 2<p> <strong>Issue:</strong> Summer 2005<p> <strong>Pages: </strong>412-429 <p> <strong>Authors:</strong> James M. Malcomson <p> <strong>Title:</strong> Supplier Discretion Over Provision: Theory and an Application to Medical Care <p> <strong>Abstract:</strong> Suppliers who are better informed than purchasers, such as physicians treating insured patients, often have discretion over what to provide. I show how, when the purchaser observes what is supplied but neither the recipient type nor the actual cost incurred, optimal provision differs from what would be efficient if the purchaser had full information, whether or not the supplier can extract informational rent. The analysis is applied to, among other things, data on tests for coronary artery disease and to Medicare diagnosis-related groups defined by the treatment given, not just the diagnosis, illustrating the biases in provision that result. <p> <hr> <ul style="padding-bottom:8px; font-size:11px"> <li><a href="http:/cgi-bin/hmrp/rje-ice-form.pl"> Search Abstracts</a> <li><a href="http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi">Order Back Issues or Articles</a></li> </ul> </div> </div>  <div id="footer" style="background: #ffffff; padding: 4px;" align="center"> <p style="font-size:10px;">Copyright © 2009 RAND Journal of Economics.</p> </div>   </div> </body></html>