AGENCY IN HEALTH-CARE - GETTING BEYOND 1ST PRINCIPLES

This paper is concerned with the application of the theory of agency to health care. It is argued that the basic theory of agency raises more questions than it provides answers when it is applied to the doctor-patient relationship. More research is needed into the nature of both the patient's and the doctor's utility functions. Only then can we begin to devise optimal incentive structures to encourage doctors to take adequate account of patient preferences.