Healthcare services could naively be viewed as any other good like apples or pears. This would mean that any theory that has been developed for private goods could equally be applied to such services. However, healthcare is obviously a very special type of good. It shares with education the fact that it is both a consumption and an investment good. It also shares with education the empirical regularity that both its supply and demand are heavily regulated, at least in most western economies. Nevertheless, there are a few phenomena that are more pervasive in healthcare than in education, let alone other goods: asymmetric information, uncertainty about future demand, and mediated demand. Although uncertainty is also present in many other consumption goods (like transportation, credit, and safety, to mention a few), in health this uncertainty is (more) multidimensional, due to the many different health risks and corresponding health services involved (oncology, traumatology, mental health, and so on). By mediated demand, I mean that in many instances it is not the patient but a physician who makes treatment decisions. Some other features could be especially relevant for healthcare, or at least have been included in the theoretical analysis of healthcare markets. One is the presence of partially altruistic decision makers, in particular doctors, who are trained to act in the clinical interest of the patient. In the same vein, healthcare services are often provided by non-profit institutions that may compete with for-profit firms, a feature that is again in common with education. For the purposes of this Handbook, I will concentrate on the aspects of healthcare demand and supply that consider health as a consumption good. I will also concentrate on those aspects where the tools of industrial organization and game theory are most useful. For this reason, the reader will find it useful to read a few other chapters of this Handbook before reading this one, unless the reader has a solid background in the aforementioned tools.
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