We consider a model in which customers sequentially negotiate nonexclusive credit or insurance contracts from multiple risk-neutral firms in a market with free entry. Each contract is subject to moral hazard arising from a common noncontractible effort decision.

This paper compares the cost and quality incentive effects of cost reimbursement and prospective payment systems in the health industru when providers are altuistic. Provider's behavioral rule is governed by a desire to maximize a weighted sum of profit and consumers' health benefit.