Torts, expertise, and authority: Liability of physicians and managed care organizations

Jennifer Arlen, W. Bentley MacLeod

Research output: Contribution to journalArticlepeer-review

46 Scopus citations


We examine optimal individual and entity-level liability for negligence when expected accident costs depend on both the agent's level of expertise and the principal's level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for medical malpractice. Under current law, physicians generally are considered independent contractors and hence MCOs are not liable for negligent acts by physicians. We find that the practice of reviewing the medical decisions of physicians affects their incentives to take care, which in turn implies that it is efficient for MCOs to be held liable for the torts committed by their physicians.

Original languageEnglish (US)
Pages (from-to)494-519
Number of pages26
JournalRAND Journal of Economics
Issue number3
StatePublished - Sep 2005
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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