Regulation On Medical Market:Asymmetric Information, Incentive Mechanism And Social Welfare

As the medical reform in China is getting deeper and deeper, available medical resources become more and more abundant. However, medical treatment is still expensive and difficult. The problem has not been effectively addressed, but has a trend to be worsened. Although the quantity and scale of hospitals in cities have been increasing, the patients visiting hospital have to wait for longer and longer time. One of the reasons of this trend is because people are more and more concern about their own health and thus increase their demand for medical services. Another reason is that there is a problem due to the system of the health care market. This dissertation focuses on the asymmetric information involving the doctor-patient relationship which influences the doctor’s behavior as well as the health care market welfare.The first chapter is an introduction on the whole article. The second chapter is an overview of asymmetric information and incentive theory. It briefly reviews the basic analytical framework of the theory of asymmetric information. The third chapter described the situation of asymmetric information problems in the medical market. It analyses several different form of asymmetric information in the medical market, the impact of asymmetric information on the medical market, information disclosure incentives in effect to solve asymmetric information problems, and the influence on asymmetry of information of China’s medical reform.Chapter four to Chapter seven describes the asymmetric information problem on the actions of the doctors and medical quality in the market from different vision. The fourth chapter analyzes the market demand and its impact on competition in the medical market under incomplete information. Patients need to select the appropriate hospital based on the quality of the hospital, but it is inaccurate for them to acquire the information about the quality of hospital services. Therefore, even a hospital lower its quality, it will not lose all patients. This market structure will affect the quality of the competition between hospitals:only if hospitals have small different service quality, they have incentive to improve the quality. Further, improving access to information in the market will make this tendency stronger.In order to solve the problems from asymmetric information, the participant of the health care market will design some incentive systems. The fifth chapter analyzes the uneven relationship between supply and demand caused by signaling mechanism based on hospital scale. The reason for this problem is, the patients do not understand their disease status, and at the same time they are risk aversion on health status. Both factors of this reason make the patients with seriously ill to be reluctant to select the low level of hospital and patients suffering from minor ailments to be desirable to choose high-level hospital. If the market believes that the large-scale of hospital means a high level of its leechcraft, large hospitals will always be in short supply.The sixth chapter analyzes the problems when the hospital uses innovation as a signaling mechanism. New treatment technology often means more veracious diagnosis and better treatment, which can help hospitals attract more patients. However, new technology does not necessarily represent a high level leechcraft, and the patients cannot distinguish the true efficacy of the new technology under asymmetric information environment. Pharmaceutical companies can take advantage of this asymmetric information with invalid innovation (which cannot actually improve the efficacy of treatment) to induce patients to buy their drugs, and then profit. Under competitive market, such invalidity innovation will bring too much to buy, and bring welfare losses in the market.The seventh chapter analyzes the choice on human capital investment and marketing investment by hospitals (and doctors) under asymmetric information. Both human capital (and thus the services’ quality) and marketing will influence the profits of hospitals. But the improvement of the quality takes a long time for the patients to understand it and then the hospital can generate revenue from it. Investment on advertising can help to accelerate the process. But to maintain the visibility from advertising requires a high level of quality of care. Thus, there is a trade-off between short-term gains and long-term gains for hospitals. In addition, the phenomenon of "learning by doing" makes the hospital to have a stronger tendency to select investments in marketing, as it can make the hospital to get more clinical practice opportunities, which can gradually improve their diagnosis and treatment.The eighth chapter is a conclusion and discussion of the article overall.