We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...

This essay surveys the body of research that asks how the efficiency of corporate investment is influenced by problems of asymmetric information and agency. I organize the material around two basic questions. First, does the external capital market channel the right amount of money to each firm?...

By 1993, over 70 of all Americans with health insurance were enrolled in some form of managed care plan. The term managed care encompasses a diverse array of institutional arrangements, which combine various sets of mechanisms, that, in turn, have changed over time. The chapter reviews these...

This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more...

Prevention ranges from medical decisions such as vaccinations and clinical preventive services delivered during periodic health examinations to private health lifestyle decisions such as regular exercise and non-smoking. The aim of this chapter is to provide an overview of economic issues that...

Physicians are traditionally liable under a negligence rule of liability. Economic analysis of liability rules, including malpractice, assumes that the primary function of liability is injury prevention (deterrence). Compensation can be provided more efficiently through other forms of social or...

This paper is concerned with the economics of mental health. We argue that mental health economics is like health economics only more so: uncertainty and variation in treatments are greater; the assumption of patient self-interested behavior is more dubious; response to financial incentives such...

Economic theorists have devoted considerable attention to analyzing models of closely related incentive contracting problems that arise in the study of public procurement, private procurement, regulation, the theory of the firm, the theory of organizations, and managerial compensation. The...

This chapter summarizes the many aspects of public policy for health care. I first consider government policy affecting individual behaviors. Government intervention to change individual actions such as smoking and drinking is frequently justified on externality grounds. External costs of...