This is the story of a patient with a wart who is rejected by five departments of a National Health Service.

Firstly, the family doctor prescribes a cream for external use that is of low cost to the health service but unpleasant to use – so is of high cost for the user. After it is seen to be inefficient, the patient is sent to a surgeon who removes the wart surgically. Since it is a large wart and treatment is given in the outpatients’ department, the doctor does not remove the entire wart and warns the patient that it is likely to reappear in which case he should return for a second surgical treatment before it grows too large. When the time comes, he is treated by a different doctor who considers—perhaps in view of the large number of people in the waiting-room—that he should be seen in the dermatology department. So the patient has to return to his family doctor in order to gain access to a dermatologist. The latter then prescribes the same, inefficient treatment that was initially prescribed by the family doctor.

Guide for discussion
Who has the best information to determine which treatment is the best? How can this be taken into account? More abstractly, is this a problem of “coordination” or “motivation”? How this problem could be solved from both points of view?


Both patient and doctor have relevant information in order to reach a decision on the treatment—professional training, knowledge of prior treatments, opportunity cost of time, etc. If this case is seen as a problem of coordination, then the solution would be to design information mechanisms. So the “solution” is the medical case history, preferably in computerized form. This is a very costly solution although it is becoming less so. But, above all, it is unlikely to be of any use because, however complete the case history, the problem would be unlikely to be very different. And the fact is that they had enough information if they had wanted to use it—the data from the previous doctor’s appointments and the information given by the patient himself. At no stage did the doctors suggest the complaint was complicated or that they had doubts about it or that they were unable to provide the appropriate treatment. And, if they had had a full case history, they might still have said that they were not clear about it and needed further data or that the best treatment for the complaint could not be given by their department.

However, if the incentives had been different—for example, if the patient had been paying for his treatment directly—then the doctors would have used all the information available to satisfy him and cure his ailment—or whatever he believed his ailment to be. The family doctor would have had an electric scalpel in his surgery and would have known how to use it. Would any sort of problem have arisen from the informational asymmetry existing in this context between the doctor and the patient? How would this problem differ if, instead of individual doctors, they had formed part of a firm of professional consultants similar to the large professional services or auditing firms? Would the kind of compensation structure (i.e., if this is based individual versus team performance) matter?

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