In selection markets, where the cost of serving consumers is heterogeneous and noncontractible, nonprice product features allow a firm to sort profitable from unprofitable consumers. An example of this “sorting by quality” is the use of down payments to dissuade borrowers who are unlikely to repay. We study a model in which consumers have multidimensional types and a firm offers a single product of endogenous quality, as in Spence (1975) . These two ingredients generate a novel sorting incentive in a firm’s first-order condition for quality, which is a simple ratio. The denominator is marginal consumer surplus, a measure of market power. The numerator is the covariance, among marginal consumers, between marginal willingness to pay for quality and cost to the firm. We provide conditions under which this term is signed and contrast the sorting incentives of a profit-maximizer and a social planner. We then use this characterization to quantify the importance of sorting empirically in subprime auto lending, analytically sign its impact in a model of add-on pricing, and calibrate optimal competition policy in health insurance markets.

We study the effect on stock volatility and turnover of coverage by traditional news media and social media. We find that coverage by traditional news media predicts decreases in subsequent volatility and turnover, but coverage by social media predicts increases in volatility and turnover. We show that these patters are consistent with a model of "echo chambers", where social networks repeat news, but some investors interpret repeated signals as genuinely new information.JEL: D83, G02.

To mitigate adverse selection in insurance markets, individuals are often mandated to buy at least a baseline plan, but may choose to opt into a premium plan. In some markets, such as US health exchanges, each plan is responsible for the full expenses of those who buy it (“total pricing”). In other markets, such as the privately supplied “Medigap” top-ups to traditional government-provided Medicare, premium providers are only responsible for the incremental expenses they top up (“incremental pricing”). For parameter values calibrated to health exchanges, the shift from total to incremental pricing reduces the welfare loss from adverse selection by an order of magnitude. (JEL D82, G22, H51, I13, I18)

We study the effect on stock volatility and turnover of coverage by traditional news media and social media. We find that coverage by traditional news media predicts decreases in subsequent volatility and turnover, but coverage by social media predicts increases in volatility and turnover. We show that these patters are consistent with a model of "echo chambers", where social networks repeat news, but some investors interpret repeated signals as genuinely new information.

BackgroundIn the UK, the National Health Service has various incentivisation schemes in place to improve the provision of high-quality care. The Quality Outcomes Framework (QOF) and other Pay for Performance (P4P) schemes are incentive frameworks that focus on meeting predetermined clinical outcomes. However, the ability of these schemes to meet their aims is debated.Objectives(1) To explore current incentive schemes available in general practice in the UK, their impact and effectiveness in improving quality of care and (2) To identify other types of incentives discussed in the literature.MethodsThis systematic literature review was conducted using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses guidelines. Six databases were searched: Cochrane, PubMed, National Institute for Health and Care Excellence Evidence, Health Management Information Consortium, Embase and Health Management. Articles were screened according to the selection criteria, evaluated against critical appraisal checklists and categorised into themes.Results35 articles were included from an initial search result of 22087. Articles were categorised into the following three overarching themes: financial incentives, non-financial incentives and competition.DiscussionThe majority of the literature focused on QOF. Its positive effects included reduced mortality rates, better data recording and improved sociodemographic inequalities. However, limitations involved decreased quality of care in non-incentivised activities, poor patient experiences due to tick-box exercises and increased pressure to meet non-specific targets. Findings surrounding competition were mixed, with limited evidence found on the use of non-financial incentives in primary care.ConclusionCurrent research looks extensively into financial incentives, however, we propose more research into the effects of intrinsic motivation alongside existing P4P schemes to enhance motivation and improve quality of care.