In our theoretical model some firms do not offer health insurance to their employees because of large between-firm heterogeneity in expected employee health care costs. Because job turnover rates for healthier employees reduce by less than those for sicker employees when firms offer health...

A government or public organization would like to subsidize an indivisible good. Consumers’ valuations of the good vary according to their wealth and benefits from the good. Education, medical care, and housing are common examples. A regulator has access to either wealth or benefit...

In this article, we study the optimal regulation of a dominant firm when an unregulated firm actively competes. Generally, the existence of an active rival imposes new and binding constraints on regulatory problems. We characterize optimal policies both when demands are known (complete...

We study the interaction between a public sector and a private sector in the provision of a private good. Under a limited budget, the public supplier uses a rationing policy. A private ?rm may supply the good to those consumers who are rationed by the public system. Consumers have di¤erent...

A model of vertical integration is studied. Upstream firms sell differentiated inputs; downstream firms bundle them to make final products. Downstream products are sold as option contracts, which allow consumers to choose from a set of commodities at predetermined prices. The model is...

I reconsider the implementation of efficient cost and quality efforts when health-care providers may refuse services to consumers, and introduce a mechanism that is a combination of prospective payment and cost reimbursement. Conditions are derived for the prospective payment level and the...

This paper introduces a theory of network incentives in managed health care. Participation in the plan's network confers an economic benefit on providers; in exchange, the plan expects compliance with its protocols. The network sets a target for the number of outpatient visits in an episode of...

If an illness is not contractible, then even partially insured consumers demand treatment for it when the benefit is less than the cost, a condition known as moral hazard. Traditional health insurance, which controls moral hazard with copayments (demand management), can result in either a...