Optimal rationing within a heterogeneous population.

Summary A government agency delegates to a provider (hospital, medical gatekeeper, school, social worker) the decision to supply a service or treatment to individual recipients. The agency does not perfectly know the distribution of individual treatment costs in the population. The single-crossing property is not satisfied when the uncertainty pertains to the dispersion of the distribution. We find that the provision of service should be distorted upward when the first-best efficient number of recipients is sufficiently high.