A perspective on the analysis of credible commitment and myopia in health sector decision making

This paper examines the role of credible commitment in facilitating long-term decision making in health care. Commitments are defined as an undertaking by one party to perform a certain task in the future.Policy objectives and political imperatives within public sector organisations can often mean that decision making takes place on shifting institutional terrain. This creates incentives on decision making that favours those choices that yield short-term gains. Such myopia is not necessarily consistent with organisational objectives and the implementation of policies that promote such objectives. These incentive problems can be formally modelled in terms of prisoners' dilemma and co-ordination games. Measures that promote public sector organisations to credibly commit to various values or policy positions can assist in reconciling individual and organisational objectives by allowing decision makers, in good faith, to build long-term outcomes into their decision making. In effect they allow co-operation and co-ordination. Given these potential gains, credible commitment can occur spontaneously but when not, may need to be facilitated by a third party (notably the State). Such forms of commitment are usually apparent in various policy measures such as health service constitutions, long-term contracting, legislation and incentive payments. Measures that secure credible commitment allow the discount rate to be reduced on long-term decisions of not only public sector organisations but also those stakeholders who rely on stable public sector institutions. However, the importance of the notion of commitment needs to be recognised against the background of other institutional factors that may influence decision making.