1) Describe some healthcare situations in which an agent has taken advantage of the principal. Then describe some healthcare transactions that have not taken place because of fears about asymmetric information.

2) Identify some ways that nursing homes can signal high quality to consumers. Which of these signals are most apt to be reliable?

3) What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?

4) One physical therapist is paid $20 per session. Another is paid $400 per week plus $20 per session in excess of 20 sessions per week. A third is paid $400 per week, plus $200 per week for having all paperwork complete and filed within 48 hours, plus $20 per session in excess of 30 sessions per week. How do the therapist’s incentives to produce sessions compare? How do their incentives to complete paperwork differ?

5) One physician is paid $100 per visit. Another is paid $2,500 per week plus $100 per session in excess of 20 sessions per week. A third is paid $2,000 per week plus $100 per session in excess of 20 sessions per week. The third physician is also paid a weekly bonus of $500 for being in the top quartile in management of common chronic diseases, appropriate antibiotic use, preventive counselling, screening tests, and appropriate prescribing in elderly patients. How do the physicians incentives compare?