| Abstract: | Increasing specialization has become a dominant feature of modern medicine. We develop a model of specialization when vertical restraints prevent transfers between physicians but task adhesion makes payment for one task contingent on carrying out another. We show how the probability of transitioning between tasks and relative payments for adjacent tasks determine the division of labor in the presence of task adhesion, and why skill complementarities may not be necessary to inhibit specialization. These results imply that a regulator who sets prices without considering the disincentives to specialize inherent in the demand complementarities described here may fail to maximize welfare. |
