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201566 https://hdl.handle.net/2286/R.2.N.201566 http://rightsstatements.org/vocab/InC/1.0/ All Rights Reserved 2025 144 pages Doctoral Dissertation Academic theses en Bozzo Galleguillos, Nicola Ignacio Chade, Hector Manelli, Alejandro Larroucau, Tomas Arizona State University Partial requirement for: Ph.D., Arizona State University, 2025 Field of study: Economics This dissertation explores how informational asymmetries and market structure influence optimal contracts and market outcomes in vertically related markets and health insurance systems. It is divided into two chapters, each focusing on different but interconnected situations where a principal (such as a manufacturer or insurer) engages with agents (like retailers or consumers/providers) under private information and strategic behavior. The first chapter examines the design of optimal health insurance menus amid varying provider quality for various diseases, with a focus on both monopolistic and competing insurers. It theoretically shows that a monopolist offers broader (more efficient) networks at higher premiums, while competing insurers prefer narrower networks to limit competition. Using a rich dataset on Chile's private health insurance system, it develops a version of the theory model suitable for estimation. Focusing on the allocation of consumers to providers, it found that consumers’ choices closely resemble the most efficient allocation due to regulations mandating insurers to cover at least what the public insurer offers. In light of the theoretical results, this resemblance would not persist in an unregulated environment, underscoring the crucial role of regulation in these markets. The second chapter studies a vertical market where a manufacturer sells an indivisible, essential input to multiple downstream retailers. The manufacturer sets the retail price but cannot observe the retailers’ costs or the level of effort they take, giving rise to both moral hazard and adverse selection. These information asymmetries distort prices upward and the effort downwards, reducing overall efficiency. However, introducing competition among retailers can mitigate these inefficiencies. Competition disciplines informational rents and spreads the cost of the desirable action level across agents, lowering the marginal cost of action and improving outcomes. The model illustrates how the manufacturer’s valuation of project success affects equilibrium prices and action levels, and how competition among multiple agents partially mitigates information asymmetries. Together, these chapters contribute to the understanding of contract design and market performance in the context of asymmetric information. They emphasize how market structure and regulation can counterbalance information frictions, with implications for industrial organization, health economics, and public policy. Economics Essays in Contract Theory and Vertical Relations