Health Care Management Papers

Document Type

Journal Article

Date of this Version

12-2013

Publication Source

American Economic Review

Volume

103

Issue

7

Start Page

2875

Last Page

2910

DOI

10.1257/aer.103.7.2875

Abstract

If profit maximization is the objective of a firm, new information about quality should affect firm behavior only through its effects on market demand. I consider an alternate model in which suppliers are motivated by a desire to perform well in addition to profit. The introduction of quality "report cards" for cardiac surgery in Pennsylvania provides an empirical setting to isolate the relative role of extrinsic and intrinsic incentives in determining surgeon response. Information on performance that was new to surgeons and unrelated to patient demand led to an intrinsic response four times larger than surgeon response to profit incentives.

Copyright/Permission Statement

Copyright © 2016 AEA

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Date Posted: 27 November 2017

This document has been peer reviewed.