We examine how to procure health care services at minimum cost while preventing suppliers from refusing to care for high-cost patients. A single risk-adjusted prospective payment is optimal only when it is particularly costly for the supplier to discover likely treatment costs. Cost sharing is...

In this paper we consider recent proposals to auction U.S. import quotas. using the funds so obtained to encourage relocation out of the protected industries. We argue that the information available to the government, or lack thereof, is a critical factor in understanding these policies. In a...

Owners of property and assets frequently delegate decisions about operating and maintaining their property to managers who are better informed about local market conditions. We analyze how owners optimally contract with managers who vary in their expertise at prescribing service. We show that...

We analyze a procurement problem in which the quality of the delivered product can be observed perfectly by the buyer and supplier, but may not be verifiable, i.e., may not be observable to any third party. We present a set of plausible conditions under which the equilibrium welfare of both the...

We analyze the optimal design of capital structure in agency relationships. When a risk-averse principal controls the agent's capital structure, she awards a larger equity stake to outsiders the smaller the agent's productivity. When she controls both the timing and the terms of the agent's...

Constrained joint-profit-maximizing retail contracts are derived when the dealer is privately informed about demand conditions before contracting with the manufacturer. Demand is increased by dealer promotion, which is unobservable by the manufacturer. Consequently, the manufacturer does not...

We consider the design of regulatory policy when the regulator is imperfectly informed about both the firm's cost function and the demand function it faces. To some extent the optimal policy here is the natural "combination" of the optimal policies when there is uncertainty only about either...