Download Basic Concepts of Health Economics

Lecture 13
Assoc. Prof. Sencer Ecer
HEALTH ECONOMICS
1
Medical Malpractice in the US
 Very controversial
 A costly issue
 Malpractice insurance, legal fees
 From a game-theoretic point of view, doctors don’t
have incentives to fight back, because trying to set a
reputation as tough is a public good
 So free-riding problem etc.
 However, malpractice insurers may have such
incentives
 Another example of malpractice: pharmacist errors
2
Risk prevention game
 Box 13.2
 Learned Hand (this is actually the name of a Judge)
Rule
 Negligence is when a doctor fails to take some action to
prevent harm and when it would on average cost less to
prevent the harm than the costs of the harm itself
 With injury prevention 100+C, C is cost of action, 100
is damage
 Without injury prevention, 200 in damage
 What does the Learned Hand rule imply about C?
3
Risk prevention game
 Spend C each if C< (200-100)=100
 See the table, if C>5, then Dr. A’s choice of do not
prevent is dominant strategy. It is lowest cost.
 100+C>105 and 195+C>200
 Dr. A will choose Prevent at all times iff C<5
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