The healthcare market is imperfect given there a lack of full disclosure (asymmetric information), barriers to entry, and some external manipulation from the government in the form of legislative initiatives and regulations. As you are likely aware, health care is one of the most heavily regulated industries. This makes sense when to consider the nature of our business. After all, the purpose of regulation is to protect consumers for poor business practices. Many of the laws and regulations spring from the actions of special interest groups who are looking to influence the delivery of healthcare and control the actions of other industries that routinely support clients (e.g., pharmaceutical, insurance, managed care, public health, etc.). Given that the healthcare market is imperfect, there is a likelihood that healthcare reform measures and resulting regulations aren’t going to have a significant impact on the improvement of outcomes. It has been well understood that consumer behaviors aren’t always rational. It’s important that we take a more realistic view of consumerism when making decisions and developing policies. In economics, when we abandon the assumptions of complete rationality, complete willpower, and complete selfishness, it is referred to as behavioral economics (Lee, 2015). More precisely, behavioral economics addresses the choices that people make when taking shortcuts or use the “rule of thumb” in their decision-making process. While it may make sense to use a “rule of thumb” when making decisions, taking shortcuts can result in poor decisions that can create more harm than good. In this unit, we’ll explore how behavior economics can be used to make sound decisions. In addition, we’ll examine the limitations associated with rational decisions making.
As administrators, we need to fully understand how governmental regulations and behavioral economics impact the market and management decision-making, In order to gain a deeper appreciation for these economic concepts and their relevance to the healthcare and related industries, you will be expected to complete the following end-of-chapter problems and mini-case:
Chapter 17: Case 17.3, Changing Consumer Information (pp. 286-287; Lee textbook); 17.3, 17.4, 17.9, and 17.12 (pp. 288-289) Note: Problems 17.4, 17.9, and 17.12 WILL NOT require numeric computations.
Chapter 18: 18.1 and 18.3 (pp. 302; Lee textbook)
Unit Learning Outcomes
ULO 1. Justify the supposition that rational decision making has limits. (CLO 4 and 7)
ULO 2. Analyze the ways in which bounded rationality affects decision making. (CLO 4 and 7)
ULO 3. Analyze the effects of regulations on firms, rivals, and consumers. (CLO 1, 2, 3, 5, and 7)
Directions
The students are expected to carefully read the assignment instructions, then thoroughly and explicitly address each question. Microsoft Excel will be used to perform the mathematical computations and graphs; however, the problem and its corresponding response should be written up in a Microsoft Word document. Your responses to the assigned mini-case studies should also be included in the same document. IMPORTANT: Make certain that there is a detailed description of how the calculations were performed. You will also need to include an interpretation of the results. While there is no minimum number of references that need to be utilized to support the completion of this assignment, it is generally understood that outside sources, including the text, will be necessary to complete the problems. The document must adhere to the APA writing style in terms of using in-text citations and the listing of sources on the references page. The Microsoft Word document and Excel spreadsheet are to be uploaded under the correct unit assignment page.
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