This paper investigates the impact of monitoring institutions on market outcomes in health care. Health care markets are characterized by asymmetric information. Physicians have an information advantage over patients with respect to the appropriate treatment for the patient and may exploit this informational advantage by over-and underprovision as well as by overcharging. We introduce two types of costly monitoring, endogenous and exogenous. When monitoring detects misbehavior, physicians have to pay a fine. Endogenous monitoring can be requested by patients, whereas exogenous monitoring is performed randomly by a third party. We present a toy model that enables us to derive hypotheses and to test them in a laboratory experiment. Our results show that introducing endogenous monitoring reduces the level of undertreatment and overcharging. Even under high monitoring costs, the threat of patient monitoring is sufficient to discipline physicians.Introducing exogenous monitoring also reduces undertreatment and overcharging when it is performed sufficiently frequently. Market efficiency increases when endogenous monitoring is introduced as well as when exogenous monitoring is implemented with sufficient frequency. Our results, therefore, suggest that monitoring may be a feasible instrument to improve outcomes in health care markets.
Credence goods markets are characterized by asymmetric information concerning the needed and/or provided quality between experts and consumers. The functioning of the market heavily relies on trust on the side of the consumer as well as trustworthiness on the side of the expert. However, a great amount of empirical and experimental papers document for a range of different credence goods markets the existence of over-, undertreatment, and overcharging. In this paper, we study two determinants of trust and trustworthiness in experimental credence goods markets, namely the effect of a health frame (versus a neutral frame) as well as the identity of the expert (being either a standard student subject or a prospective physician). Our results reveal that the identity in combination with a health frame has a significant impact on the level of trust shown by a higher willingness of consumers (patients) to enter the market. Trustworthiness, as measured by the provision and charging behavior of experts, however, is not significantly influenced by the health care framing, nor by the subject pool.
Cooperation and Discrimination Within and Across LanguageBorders: Evidence from Children in a Bilingual City *We present experimental evidence from a bilingual city in Northern Italy on whether the language spoken by a partner in a prisoner's dilemma game affects behavior and leads to discrimination. Running a framed field experiment with 828 six-to eleven-year old primary school children in the city of Meran, we find that cooperation generally increases with age, but that the gap between cooperation among in-group members and cooperation towards children speaking another language is considerable and increasing with age. This gap is due to both, in-group favoritism and language group discrimination.
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