Akerlof compared a world with asymmetric information to one with perfect information. Prices are higher because of these informational asymmetries. Akerlof also shows that there exists a price premium in the presence of asymmetric information. In his model, the presence of asymmetric information leads the market to fail in the sense that welfare-improving trades between suppliers and consumers fail to occur.
The underlying economic theory that more quality information improves consumer welfare dates back to Akerlof (1970). This paper examines the introduction of nursing home report cards by the Centers for Medicare and Medicaid Services (CMS) on nursing home quality and the demand for nursing home care. Failure to account for the underlying market structure in constructing quality policy initiatives may doom these initiatives to irrelevancy. However, report cards may also increase market power on the part of providers, which may ultimately decrease quality of care ( Miller 2006). On the one hand, report cards may empower consumers to make more informed choices and increase quality competition among providers. The issuance of report cards may change the incentives of a nursing home to invest in quality, but it is uncertain what the net impact of the change in incentives will be on the quality of care. However, the overall welfare implications of these report card efforts are unclear. This interest has given rise to several public and private provider health plan report cards, including nursing home report card initiatives. Since the late 1980s, there has been increasing interest in providing useful information to consumers regarding the quality of care across the medical care sector. The patient is often neither the decision maker nor able to easily evaluate quality or communicate concerns to family members and staff. Although nursing home care is fairly nontechnical in nature, monitoring of care can often be difficult, and the learning period may be nontrivial relative to the length of stay in some instances. Asymmetric information about quality is present in health care markets ( Arrow 1963), and the lack of quality information in the nursing home industry is thought to be particularly acute ( Hirth 1999 Chou 2002). Furthermore, if consumers have difficulty assessing quality, then it diminishes the incentive for firms to invest in improving quality.
If the quality of a good is difficult to assess, consumers and sellers may have difficulty agreeing on a price. It is well known that the lack of available consumer information about product quality can lead to poor market outcomes ( Akerlof 1970).
0 kommentar(er)
