International Journal of Health Care Finance and Economics

, Volume 10, Issue 3, pp 239-256

First online:

Strategic costs and preferences revelation in the allocation of resources for health care

  • Laura LevaggiAffiliated withFaculty of Science and Technology, Free University of Bozen
  • , Rosella LevaggiAffiliated withDipartimento di Scienze Economiche, Università di Brescia Email author 

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This article examines the resources allocation process in the internal market for health care in an environment characterised by asymmetry of information. We analyse the strategic behaviour of the provider and show how, by misreporting its cost function and reservation utility, it might shift the allocation of resources away from the purchaser’s objectives. Although the fundamental importance of equity, efficiency and risk aversion considerations which have been the traditional focus of the literature on allocation of resources should not be denied, this paper shows that contracts and internal markets are not neutral instruments and more research should be devoted to studying their effects.


Internal market Asymmetry of information Intrinsic motivation

JEL Classification

I11 I18