AGENCY IN HEALTH-CARE WITH AN ENDOGENOUS BUDGET CONSTRAINT

In this paper a doctor acts as a perfect agent for a group of patients in an environment where the health service is funded by a group of contributors. The contributor group donates resources to the health sector in accordance with its split preferences about the health care services which they would like for themselves and those which they would like for others. We show that the size of the health budget is endogenous and depends on the choices made by the doctor. The focus is on the division of the budget between health enhancing and non-health enhancing health care.