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25 September, 12:13

Which of the following refers to the principal-agent problem in the market for health care?

a. Doctors pursuing their own interests rather than the interests of their patients. b. Doctors pursuing only the interests of their patients rather than the interest of society. c. A conflict of interest between doctors and health insurance companies. d. Doctors pursuing the interests of health insurance providers rather than the interests of their patients.

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  1. 25 September, 15:46
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    a. Doctors pursuing their own interests rather than the interests of their patients

    Explanation:

    A principal is an individual or a group that entrusts a certain responsibilities to someone else (known as the agent) in an entity. The agent therefore has superior information than the principal and therefore the former makes decisions on behalf of the latter. A conflict of interest can occur when the agent pursues his own interests for personal gains and ignores the responsibility he was hired to do hence creating Principal-Agent problem. Among these choices, doctors pursuing their own interests rather than the interests of their patients will lead to principal agent problem.
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