Heterogeneous physicians, imperfect courts, and the negligence standard
نویسنده
چکیده
Type 1 and 2 errors of courts deciding in medical malpractice trials a¤ect the physiciansprovision of care. The paper at hand uses a principal-agent model to explain why uncertain liability prospects induce a welfare reducing separated equilibrium where altruistic physicians practice defensive medicine and sel sh physicians act negligently. By minimizing the loss of welfare, it identi es an optimal standard of due care, solving the trade-o¤ between marginal costs and bene ts of the liability threat, which generally deviates from the rst-best level of care. From this, optimal liability rules for coping with heterogeneous physicians follow. JEL classi cation: I11, K13
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