Doctor A has always been paid using a ‘fee for service’ system. His province now switches to paying
doctors using a using a ‘capitation system.’ First, explain the difference between these 2 systems. Second,
explain if/how economists predict Doctor A may adjust his behaviour following implementation of the new
programme. Your answer should make reference to both theoretical reasoning and empirical evidence we
have covered in class this week.
Remember that the main point of this essay question is to test whether or not you understand this week’s
course material. Show us that you do.
You are not expected to do any research/reading other than what has been covered this week’s
lectures/papers, nor will any additional points be allocated to responses referring to materials other than
class lectures/readings.
Sample Solution