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In [[health economics]], supplier induced demand (SID) can be defined as the amount of demand that exists beyond what would have occurred in a market in which patients are fully informed.<ref>Donaldson, C. & Gerard, K. (1993). Economics of health care financing: the visible hand (pp.116-117). New York, NY: St. Martin's Press.</ref> In healthcare, a physician acts as an agent on behalf of the patient (the principal) guiding them to make the best possible treatment decisions. This agency relationship is influenced by [[information asymmetry]] between a physician and a patient, where it is assumed that the physician has more knowledge about diagnostic and treatment options than the patient. Asymmetry of information can also be influenced by the physician's own clinical experiences, expertise, and professional judgment as sometimes a patient will request their physician's personal opinion to aid them in making a healthcare decision.<ref>{{cite journal | last1 = Richardson | first1 = J. | last2 = Peacock | first2 = S. | year = 2006 | title = Supplier-induced demand: Reconsidering the theories and new Australian evidence | journal = Applied Health Economics and Health Policy | volume = 5 | issue = 2| pages = 87–98 | doi=10.2165/00148365-200605020-00003| pmid = 16872250 | s2cid = 8293067 }}</ref> A physician who is a "perfect agent" is one who would make recommendations for a patient that the patient would make for themselves if they had the same information.<ref name="The economics of health and health care">Folland, S., Goodman, A., &Stano, M. (2012). The economics of health and health care (7thed.) (pp. 305-308). Boston, MA: Pearson.</ref> SID can occur because of a breakdown in this [[Agency (philosophy)|agency]] relationship and happens when a physician recommends or encourages a patient to consume more care than is required for their medical problem, for example, ordering tests that the physician knows are not needed to make a diagnosis or ordering treatments that the physician knows will have minimal benefit.
Research, however, suggestposits that the identificationdiscernment of supplierSupplier-Induced induced demandDemand (SID) inwithin the healthhealthcare sectordomain may not alwaysconsistently bealign accuratewith precision. An empirical studyinquiry delving examininginto the effectimpact of surgeon supplyavailability in certainspecific areasregions on the demandrequisition for surgical operationsprocedures foundhas uncovered that surgeonthe supply isof completelysurgeons exhibits complete wage inelasticinelasticity. Consequently, concludingit is deduced that the incentiveimpetus tofor surgeons to increasestimulate consumer demand isremains thereforesomewhat questionabledubious.<ref>{{Cite journalAn |last=Greenadditional |first=Jerryinvestigation |date=1978 |title=Physician-Induced Demand for Medical Care |url=https://scholar.harvard.edu/green/publications/physician-induced-demand-medical-care |journal=The Journal of Human Resources |volume=13 |pages=21–34|doi=10.2307/145246 |jstor=145246 |pmid=722067 }}</ref> A further study examiningscrutinizing the effectivenessefficacy of cross-sectional studies identifyingaimed supplierat pinpointing supplier-induced demand in the healthhealthcare sectorarena has raised the questionpertinent thatquery: if suppliers canwield the potential to influence demand, might there must beexist a limitfinite on their abilityboundary to do so.<ref>{{Cite journal |last1=Auster |first1=Richard |last2=Oaxaca |first2=Ronald |date=1981 |title=Identification of Supplier Induced Demand in the Health Care Sector |url=https://www.jstor.org/stable/145624 |journal=The Journalextent of Humantheir Resourcessway? |volume=16This |issue=3inquiry |pages=327–342|doi=10.2307/145624subsequently |jstor=145624proffers |pmid=7264294the }}</ref> The suggestion is then madenotion that a formal mechanism is requiredimperative to outlineelucidate the reasoningrationale and driving forces behindpropelling drivingthe outward expansion of the demand curve outwards. FollowingSubsequent to this identificationdiscernment, it canbecomes be saidapparent that empirical testsassessments forof supplier -induced demand may not be entirely practical and accurate withwhen relying on cross-sectional aggregate datedata used inas foundational research. Furthermore, a weaknessfrailty is discernible in these studies candue be found into their dateantiquated ofpublication publicationdates, namely 1978 and 1981 respectively. The developmentevolution of medical treatments, drugspharmaceuticals, and therapeutics has advancedmade considerable greatlystrides in the lastpast few decades since thesethe studiespublication wereof publishedthese andstudies, consequentiallypotentially willresulting havein likelya shiftedtransformation of the nature of supplier -induced demand inwithin the healthhealthcare sector.
[[File:Supplierinduceddemanddiagram.png|thumb|right|Based on information from Folland, S., Goodman, A.C., & Strano, M. (2013). Chapter 15: The Physician's Practice in ''The Economics of Health and Health Care.'' Boston: Pearson]]
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