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Demand inducement as cheap talk
Author(s) -
Calcott Paul
Publication year - 1999
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/(sici)1099-1050(199912)8:8<721::aid-hec486>3.0.co;2-a
Subject(s) - imperfect , agency (philosophy) , neologism , microeconomics , economics , cheating , test (biology) , perfect information , actuarial science , business , psychology , social psychology , linguistics , paleontology , philosophy , biology , epistemology
The doctor–patient interaction is analysed in a game of cheap talk. Causes and consequences of imperfect agency are examined. One form of imperfect agency, supplier‐induced demand, is a feature of neologism proof equilibria with some parameter values but not with others. The model is used to evaluate two tests that have been used to test for the existence of supplier‐induced demand. The analysis suggests that the two tests, which compare the medical utilization of informed and uninformed consumers, are not valid. Copyright © 1999 John Wiley & Sons, Ltd.