Optimal Liability Design for Medical AI

Artificial intelligence (AI) is increasingly integrated into medical decision-making, yet its liability implications remain complex, particularly when physicians differ in diagnostic skills and their quality is unobservable. This paper develops a principal-agent model in which a social planner designs medical liability to regulate a physician with private quality information who chooses between a standard treatment, a personalized judgment-based treatment, or following an imperfect AI recommendation. Our analysis yields several novel insights. First, we show that the optimal mechanism under asymmetric information is surprisingly simple: a uniform, one-size-fits-all liability level for all physician types who deviate from the standard of care. Despite physician heterogeneity, this simple policy often achieves the full-information first-best outcome, particularly when standard care is reliable or AI is highly accurate. Second, the relationship between AI accuracy and optimal liability is non-monotonic. Contrary to common intuition, better AI does not always imply more relaxed liability. As AI accuracy increases, the optimal liability either decreases monotonically or follows an inverted-U pattern, depending on the uncertainty of the standard treatment. Third, asymmetric information does not universally reduce social welfare. Welfare loss arises only when standard care is unreliable and AI accuracy is too low; even then, its magnitude follows an inverted U-shape, initially increasing as AI complicates the regulatory problem, but declining as more accurate AI helps mitigate it. Finally, we find that information asymmetry is a double-edged sword in the presence of AI, and greater transparency does not benefit all stakeholders equally.

A Learning-Based Hybrid Decision Framework for Matching Systems with User Departure Detection

In matching markets such as kidney exchanges and freight exchanges, delayed matching has been shown to improve overall market efficiency. The benefits of delay are highly sensitive to participants' sojourn times and departure behavior, and delaying matches can impose significant costs, including longer waiting times and increased market congestion. These competing effects make fixed matching policies inherently inflexible in dynamic environments. We propose a learning-based Hybrid framework that adaptively combines immediate and delayed matching. The framework continuously collects data on user departures over time, estimates the underlying departure distribution via regression, and determines whether to delay matching in the subsequent period based on a decision threshold that governs the system's tolerance for matching efficiency loss. The proposed framework can substantially reduce waiting times and congestion while sacrificing only a limited amount of matching efficiency. By dynamically adjusting its matching strategy, the Hybrid framework enables system performance to flexibly interpolate between purely greedy and purely patient policies, offering a robust and adaptive alternative to static matching mechanisms.