Modelling Nonlinearities and Reference Dependence in General Practitioners' Income Preferences. (10th June 2015)

• Record Type: Journal Article
• Authors: Holte, Jon Helgheim; Sivey, Peter; Abelsen, Birgit; Olsen, Jan Abel
• Is Part Of: Health economics. Volume 25:Number 8(2016)
• Page Start: 1020
• Page End: 1038
• Publication Date: 2015-06-10
• Subjects: nonlinearity -- reference dependence -- income preferences -- general practitioners -- discrete choice experiments -- contingent valuation; Medical economics -- Periodicals; Economics, Medical -- Periodicals; Health Care Costs -- Periodicals; Health Policy -- economics -- Periodicals; Health Services -- economics -- Periodicals; 362.1
• DOI: 10.1002/hec.3208
• Languages: English
• ISSNs: 1057-9230

Abstract

Abstract: This paper tests for the existence of nonlinearity and reference dependence in income preferences for general practitioners. Confirming the theory of reference dependent utility within the context of a discrete choice experiment, we find that losses loom larger than gains in income for Norwegian general practitioners, i.e. they value losses from their current income level around three times higher than the equivalent gains. Our results are validated by comparison with equivalent contingent valuation values for marginal willingness to pay and marginal willingness to accept compensation for changes in job characteristics. Physicians' income preferences determine the effectiveness of 'pay for performance' and other incentive schemes. Our results may explain the relative ineffectiveness of financial incentive schemes that rely on increasing physicians' incomes. Copyright © 2015 John Wiley & Sons, Ltd.