Supply Decisions among Dentists Working within a Fixed‐fee System of Dental Care Provision

In Norway fees for dental treatment did not increase at the same rate as prices for other goods and services during the 1980s. The aim of this study was to examine how this decrease in fees in real terms has influenced dentists' work decisions with respect to supply of services. Data on characteristics of the dentist and the dental practice were collected for 1979, 1984, and 1986. The dependent variable was supply of dental services, measured as the number of patient care hours worked per annum. The hourly fee for dental care was equivalent to dentists' hourly wage rate. Supply increased as fees decreased. This could be explained either as a response of the patient or the dentist to reduced fees. Although the data did not give conclusive evidence as to which effect was most important, the authors have put forward the view that the main effect was dentists' response to reduced fees. The main argument put in favor of this view is that dentists have an overall knowledge of the effect of a change in fees on their income. The impact of a change in fees is much greater on the provider who supplies the services to many individuals over a long period of time, than on an individual consumer who buys the services once or twice a year. It was concluded that, in the short run, a fixed‐fee schedule may not be very effective in limiting costs for dental care.