Question

Doctors routinely ask patients for personal information such as occupation, employer, home address, and insurance coverage.

Answer these questions:

1. How do the following factors affect the scope for price discrimination in medical services?
   1. Doctors treat patients on an individual basis, and it is physically impossible to transfer medical treatment from one person to another.
   2. Characteristics such as occupation and home address are quite fixed.
2. Explain how, if doctors use price discrimination, they can treat more patients than if they use uniform pricing.

Answer 1

Doctors charge different prices to different patients . This is possible only when he knows the income of the patient . Such personal information reveals the standard of living of a patient and his income . This information helps a doctor to price discriminate to increase profits and also to provide medical services to patients with lower income at lower rates .

The information helps to capture a part of consumer surplus by determining the patients's willingness and ability to pay . Occupation , employer , insurance coverage are indication of such ability to pay .

Individual patients with different willingness to pay are charged differently to effectively prices discriminate .

With uniform pricing some may not be able to afford the treatment . So applying price discrimination helps a doctor to charge less from the poor and compensate for it by charging more from the people with high income . So the number of patients increases .