Introduction to some fundamental concepts in the economic analysis of dental care delivery

This paper discusses some basic economic principles and concepts and how they relate to the analysis of dental care delivery. The fundamental theories of consumer behavior, profit maximization, information and transaction costs, and agency are considered. It is asserted that the information gap existing between patients and providers gives rise to a principal-agent problem, the operative element of this paper. The authors conclude that while under managed fee-for-service (MFFS) delivery systems, third-party administrators use financial, administrative, and utilization management tools to guide consumer and provider behavior, to reduce the size of the information gap, and achieve a more efficient allocation of resources, this does not occur under direct reimbursement (DR).