This study investigates the effects of fee-for-service (FFS), capitation and salary, as well as the presence of benefits for patients, on the quantity and quality of effort provided by medical students in a laboratory setting.

Researchers designed a real-effort experiment, the first of its kind, to simulate the incentives and context surrounding the provision of health care services. We find that salary produces the lowest quantity of output, however the data do not show that FFS leads to a higher quantity of output than capitation. We find that the highest quality is achieved when participants are paid by salary, followed by capitation. We also find that there is less shirking under salary.

Finally, the presence of patient benefits significantly increases the quality of performance, while it has no significant impact on quantity of output.