A Theory of Waiting Time Reporting and Quality Signaling

Abstract

We develop a theoretical model to study a policy that publicly reports hospital waiting times. We characterize two effects of such a policy: the ‘competition effect’ that drives hospitals to compete for patients by increasing service rates and reducing waiting times and the ‘signaling effect’ that allows patients to distinguish a high-quality hospital from a low-quality one. While for a low-quality hospital both effects help reduce waiting time, for a high-quality hospital, they act in opposite directions. We show that the competition effect will outweigh the signaling effect for the high-quality hospital, and consequently, both hospitals' waiting times will be reduced by the introduction of the policy. This result holds in a policy environment where maximum waiting time targets are not binding. Copyright © 2015 John Wiley & Sons, Ltd.