The diffusion of medical technology: a "prisoner's dilemma" trap?

Medical technology diffusion and its effect on the modern hospital and on the rising costs of medical care is an issue which receives considerable attention from economists and policy analysts. In this paper a different approach is used to understand this phenomenon. We present the decision of a single hospital, whether or not to adopt an advanced technology system, using the concept of a noncooperative, nonzero sum game. Such presentation provides us with more insight on the conflict in which hospitals find themselves; the "catch" which pushes them to purchase more and more sophisticated and expensive technology in the hope that they will be able to successfully compete with other hospitals. The situation is further complicated by the existence of another "hidden" player--society, whose goals may differ from those of any individual hospital and even from the collective interests of the hospital sector. Possible conflicts that may exist and suggested solutions for each participant are presented and their policy implication are discussed.