Question: Goal Alignment among Physicians An elderly physician has built up his own practice into a quite valuable business. Now that he is thinking of retiring,
Goal Alignment among Physicians
An elderly physician has built up his own practice into a quite valuable business. Now that he is thinking of retiring, he wants to take on a partner to learn the business and eventually buy the practice in three years. Her compensation will be a salary plus of the profits if they are below the historical average and for any increase above the historical average. The eventual purchase price for the practice will be times the average profits over the three years. Discuss the efficiency aspects of such a contract. Are the incentives of the buyer and seller aligned?
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