Institutional considerations in priority setting: Transactions cost perspective on PBMA

Programme budgeting and marginal analysis (PBMA) is increasingly being used as a method of priority setting in the health care sector. Despite this, P BMA has, on occasions, been subject to problems in its application which ca n be seen as being 'institutional' in nature. This paper examines the exten t to which the institutional setting of PBMA affects the way in which it ca n be conducted. In particular, a transactions costs perspective is taken to analyse the extent to which variation in such costs can alter the incentiv es of the individual participants. A number of recommendations for improvin g the sustainability of such projects is then provided. Following this, the implications which this 'institutional' approach has for the evaluation of PBMA are set out. Copyright (C) 2000 John Wiley & Sons, Ltd.