Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
Physician Selection in Response to Learning about Malpractice Risk
Asymmetric information models are predicated on the idea that agents are better informed than principals about risk types, and that the principle gains information by observing outcomes. However, agents might have imperfect information about their own types, and potentially gain even more information than principals from observing outcomes. This paper develops a model in which physicians are at least as well informed as hospitals about their risk of committing medical malpractice. Predictions about relocation decisions are developed using models in which physicians have static information about malpractice risk and in which they learn after experiencing claims. The predictions of the model are tested using data on state malpractice reforms and individual malpractice payments. Empirical results suggest both that there is asymmetric information about risk and that physicians learn about risk over time.