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Modelling Nonlinearities and Reference Dependence in General Practitioners' Income Preferences

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  • Jon Helgheim Holte
  • Peter Sivey
  • Birgit Abelsen
  • Jan Abel Olsen
Abstract
This paper tests for the existence of nonlinearity and reference dependence in income preferences for general practitioners. Confirming the theory of reference dependent utility within the context of a discrete choice experiment, we find that losses loom larger than gains in income for Norwegian general practitioners, i.e. they value losses from their current income level around three times higher than the equivalent gains. Our results are validated by comparison with equivalent contingent valuation values for marginal willingness to pay and marginal willingness to accept compensation for changes in job characteristics. Physicians' income preferences determine the effectiveness of ‘pay for performance’ and other incentive schemes. Our results may explain the relative ineffectiveness of financial incentive schemes that rely on increasing physicians' incomes. Copyright © 2015 John Wiley & Sons, Ltd.

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  • Jon Helgheim Holte & Peter Sivey & Birgit Abelsen & Jan Abel Olsen, 2016. "Modelling Nonlinearities and Reference Dependence in General Practitioners' Income Preferences," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1020-1038, August.
    • Handle: RePEc:wly:hlthec:v:25:y:2016:i:8:p:1020-1038
    DOI: 10.1002/hec.3208
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    4. Thai, Thao & Lancsar, Emily & Spinks, Jean & Freeman, Christopher & Chen, Gang, 2024. "Understanding Australian pharmacy degree holders’ job preferences through the lens of motivation-hygiene theory," Social Science & Medicine, Elsevier, vol. 348(C).
    5. Schulz, Rainer & Watson, Verity & Wersing, Martin, 2023. "Teleworking and housing demand," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    6. Ge Ge & Geir Godager & Jian Wang, 2022. "Exploring physician agency under demand‐side cost sharing—An experimental approach," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1202-1227, June.
    7. Ge, Ge & Godager, Geir, 2021. "Predicting strategic medical choices: An application of a quantal response equilibrium choice model," Journal of choice modelling, Elsevier, vol. 39(C).
    8. Arthur E. Attema & Marieke Krol & Job Exel & Werner B. F. Brouwer, 2018. "New findings from the time trade-off for income approach to elicit willingness to pay for a quality adjusted life year," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(2), pages 277-291, March.

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