Health Services as Credence Goods: A Field Experiment

Information problems are a defining characteristic of health care markets. Despite their importance, there is little direct evidence of the impact of information problems between patients and physicians on the quality of treatment. Furthermore, the role of market conditions is not well understood. In this paper, we present the results from a field experiment in the market for dental care. A test patient who does not need treatment is sent to 180 dentists to receive treatment recommendations. In the experiment, we vary two factors: First, the information that the patient signals to the dentist. Second, we vary the perceived socioeconomic status (SES) of the test patient. Furthermore, we construct several measures of market conditions. Our study has two main contributions: First, we investigate physicians' provision of health care services on the level of individual patient-physician interactions. The design allows us to observe for each physician whether she/he provides the appropriate treatment recommendation or an overtreatment recommendation instead of observing only aggregate provision rates. Thus, we can provide direct evidence of overtreatment and thereby have a clean and simple measure of physician quality. Our micro approach allows us to not only observe the overtreatment behavior but also to control for the covariates on the individual level.

We find that the patient receives an overtreatment recommendation in more than every fourth visit. A low waiting time for the next possible appointment, indicating excess capacities, is associated with significantly more overtreatment recommendations. Overall, results regarding the role of market conditions can be well explained based on short-term capacity considerations. Furthermore, we observe signicantly less overtreatment recommendations for the patient with higher SES compared to lower SES under standard information. More signalled information however does not signicantly reduce overtreatment.