Document Type

Article

Comments

36 RAND JOURNAL OF ECONOMICS 494 (2005)

Abstract

The purpose of this paper is to examine optimal individual and entity-level liability for negligence when expected accident costs depend both on the agent’s level of expertise and the principal’s level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for medical malpractice. Under current law, physicians generally are considered independent contractors and hence MCOs are not liable for negligent acts by physicians. We find that the practice of reviewing the medical decisions of physicians affects their incentives to take care, which, in turn, implies that it is efficient for MCOs to be held liable for the torts committed by their physicians.

Date of Authorship for this Version

May 2005

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