ECMC34 Lecture 8.pdf

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16 Apr 2012
Target Income Model
- physicians try to maintain their income
- assumes some monopoly for physicians
- use imperfect info to induce services to maintain their target income
Evans Model
- disutility of direction model
- monopoly power for physicians
- physicians prefer not to induce demand, get disutility from inducing
- utility curves backward - economic good that is
- takes/preferences that are part of the model
- assume a profit, a function if pruce and costs
- services without inducement
- induced demand
- when you induce services you get an increase in profit
- equilibrium = tangency between profit and utility
- eg. physician is inducing services and making income that is higher than medically necessary
- suppose you have increased entry of physician
when you lose patients, it’s less
means that there is a new profit line
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