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...

In the past, constant pay rates and piece-rate systems were applied to reward employee effort. Now pay adjustments may vary between employees on the basis of subjective judgements of performance. Consequently, employees may feel that they are unfairly treated. Conflict follows with managers or...