ABSTRACT
This chapter discusses the health care providers may be motivated by factors other than profit maximisation and how this might affect their behaviour. The goal of profit maximisation provides the motivation in much of the economic theory of the firm. If firms do not maximise profits, then it follows that they may minimise costs or maximise revenue. Under perfect competition, managers cannot pursue non-profit-maximising strategies, as they would make losses and would be driven from the market. The managerial theories described above assume that the firm/health care provider has a single utility function. In contrast, behavioural theories recognise that firms are made up of diverse sets of actors, who may not share the same goals. The model yields a number of predictions, including least cost production; a bias towards high-quality services and away from low-quality services, even where the low-quality services would be in demand; duplication of equipment; and capital intensity.
