Performance indicators are increasingly used to regulate quality in health care and other areas of the public sector. We develop a model of contracting between a purchaser (principal) and a provider (agent) under the following scenarios: a) higher ability increases quality directly and...

This paper analyses simultaneous regulation of cost and quality when firms have private, correlated information about productivity and the regulator receives a signal about quality. It is shown that managerial effort and expenditures on quality are positively correlated in the optimal contract....

The increased availability of process measures implies that quality of care is in some areas de facto verifiable. Optimal price-setting for verifiable quality is well-described in the incentive-design literature. We seek to narrow the large gap between actual price-setting behaviour in...

The increased availability of process measures implies that quality of care is in some areas de facto verifiable. Optimal price-setting for verifiable quality is well-described in the incentive-design literature. We seek to narrow the large gap between actual price-setting behaviour in...

We present a model of optimal contracting between a purchaser (a principal) and a provider (an agent). We assume that: a) providers differ in efficiency and there are two types of provider; b) efficiency is private information (adverse selection); c) providers are partially altruistic or...

We present a model of optimal contracting between a purchaser and a provider of health services when quality has two dimensions. We assume that one dimension of quality is verifiable (dimension 1) and one dimension is not verifiable (dimension 2). We show that the power of the incentive scheme...