Public Policy: Using Market-Based Approaches - Department for ...

INCENTIVES
Where citizens can exercise choice regarding how much of a publicly-provided
good or service they consume, care must be taken to ensure that this does not
create an incentive to over-consume. For example, choice between providers in
the French health care system may be associated with its ranking as number one
in the World Health Organisation’s assessment of world health care systems, but
also with its high expenditure per capita on health. The fact that the French
consume three times as many antibiotics as the Germans and twice as many
anti-cholesterol drugs as the British, for example, suggest that the French
system may encourage over-consumption of health services. 215
INFORMATION ISSUES
Section 12 – Issues in the implementation of market mechanisms
As noted previously, consumers must be able and willing to gather and process
sufficient information if they are to make rational choices. Information issues can
lead to high costs of providing enough information and support, and greater
inequality if information is more readily accessible to some groups of society
than others.
Information issues are of particular significance for experience and credence
goods, which both require decisions be made with no ex ante knowledge of
quality. In credence goods, the consumer cannot even learn from previous
experience because he does not know whether he received an appropriate
quality of service, even after consumption has taken place. In other words, he
must trust the information he is given to make his decision.
The costs of providing information and support in choice-based lettings have
been significant, with pilots reporting advertising costs as the main component
of scheme operating costs. However, this approach seems to have been effective
in encouraging participation and limiting inequality. In education, consumer
feedback suggests the majority of participants feel they are provided with the
right information to make their decisions. For example, a study conducted for
the DfEE found that 87 per cent of parents interviewed were satisfied they had
the information they needed to help them choose a school. 216
The impact of information issues when introducing user choice to credence
goods are most clearly seen in the case of healthcare services. For example,
patients may exercise choice in the NHS by selecting their GP and the hospital
they attend in some cases. 217 Research shows patients are unlikely to switch GPs
or travel beyond their local hospital, even if they are dissatisfied with the
service. 218 Although this will at least partially reflect travel costs, it also points to
215 Aldridge, S. (2004). Presentation at the Social Market Foundation Seminar on Choice.
216 Quoted on p.15 of LGA (2004) Enabling Choice: Research on Choice in Public Services.
217 These include choice of GP and choice of hospital consultant for all patients, and choice of hospital only for
patients who have been kept waiting for longer than the target for elective surgery.
218 See p.23 andp.27, LGA (2004) Enabling Choice: Research on Choice in Public Services.
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