In health service markets, patients often rely on the advice of their general practitioner (GP) to decide which treatment best fits their needs. Hospitals, in turn, influence GPs referral decisions through kickbacks. We formulate a model with competitive heterogeneous GPs who differ in the...

This paper examines patient and overall welfare effects of kickbacks paid by a monopolistic hos-pital to competitive physicians in return for patient referrals. This practice is regarded as unethical and illegal in most cases. On the other hand, kickbacks can also enhance the distribution of...