Working paper No: 23/2011 May 2011 LSE Health. Sotiris Vandoros, Katherine Grace Carman. Demand and Pricing of Preventative Health Care

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Working paper No: 23/2011 May 2011 LSE Health. Sotiris Vandoros, Katherine Grace Carman. Demand and Pricing of Preventative Health Care"

Transcription

1 Working aer o: 3/0 May 0 LSE Health Sotiris Vandoros, Katherine Grace Carman Demand and Pricing of Preventative Health Care

2 Demand and Pricing of Preventative Healthcare Sotiris Vandoros, Katherine Grace Carman LSE Health, London School of Economics, UK Deartment of Economics, CentER and etsar, Tilburg University, the etherlands Working Paer o. 3/0 First ublished in May 0 by: LSE Health The London School of Economics and Political Science Houghton Street London WC E Sotiris Vandoros, Katherine Grace Carman. ll rights reserved. o art of this aer may be rerinted or reroduced or utilised in any form or by any electronic, mechanical or other means, now known or hereafter invented, including hotocoying and recording, or in any information storage or retrieve system, without ermission in writing from the ublishers. ritish Library Cataloguing in Publication Data. catalogue record for this ublication is available from the ritish Library IS [ ] Corresonding uthor Sotiris Vandoros LSE Health London School of Economics and Political Science Houghton Street London WC E United Kingdom Tel: +44(0) cknowledgements: We would like to thank Panos Kanavos, Marco Haan, Miguel Carvalho and Chris Muris for comments and suggestions on earlier versions of the aer. ll errors are our own.

3 bstract This study introduces a theoretical framework for the economics of reventative healthcare. Mathematical models are used to exlain how the rice and utilization of revention change deending on demand, as well as factors such as the rice of a cure, the robability of illness, the efficacy of treatment, the robability of illness and cost functions. Different models are develoed deending on the resence and level of health insurance and cometition in reventative healthcare markets. Findings show the effect of various factors on the rice of reventative healthcare, reveal the marginal effects of a change in the arameters on rices and suggest that under certain circumstances revention is not the otimal choice. JEL Classification: I, L Keywords: Preventative healthcare; ricing.

4 Contents. ackground The Model One roducer - Monooly Multile cometitors roviding reventative healthcare Cournot Cometition Seuential Entry Stackelberg Cometition Concluding Remarks... 6 endix... 7 References

5 . ackground In an environment of rising healthcare costs and governments efforts for cost containment, disease revention can lay an increasingly imortant role. Prevention does not necessarily reduce medical care costs, because often the intervention is delivered to a large grou, only a very small fraction of which would get the disease without the intervention and thus incur treatment costs. However, even in the cases when revention costs more than cure, it imroves eole s health, which imlies higher levels of an individual s utility. It has been suggested that the rising value of life has made the US oulation move u the marginal cost schedule of life extension (Hall and Jones 007), in which reventative case can lay a significant role. The uestion for olicy makers is, whether to cover the costs of reventative interventions on a case-by-case basis, given that the total burden of disease may be lower than the cost of revention. Previous studies have focused on the economic imlications of articular reventative interventions from a costbenefit ersective (for examle, see Macintyre et al 000, Goldie 00, van aal 006). In order to rovide tools that can hel answer uestions regarding when revention should be referred to cure, we need to examine the market of reventative health care, taking into account demand and suly of reventative interventions and cure, otimal uantities and rices for each agent and how other arameters affect rices. This aer uses a theoretical model to study demand and ricing of reventative health care in the context of different market structures and healthcare insurance environments. Prevention is the only case in which medical care does not afford satisfaction in the event of illness (rrow 963), while rimary revention constitutes of actions that reduce the occurrence or incidence of disease (Kenkel and Russell 986). The multidimensional nature of the cost of reventative care makes it articularly difficult to measure. For examle, revention concerns not only medical roducts, and the cost of revention can be monetary or non-monetary. Exercise or reducing consumtion of excess unhealthy roducts (such as cigarettes) also consists reventive care, which may not necessarily involve any kind of exenditure. Kenkel and Russell (986) exlore market failures that might lead to too little revention from a societal ersective, secifically, moral hazard, externalities Kenkel and Russell also roose the existence of secondary and tertiary revention. Our analysis is limted to rimary revention, since their definition of secondary revention (actions that reduce or eliminate the health conseuences of a disease given its occurrence) makes it difficult to distinguish between this kind of reventive care and cure. 4

6 and limited information. The authors suggest that in many cases, revention is not cheaer than a cure, although it is still a desirable social olicy. They also refer to some olicies that might encourage revention, such as subsidies and imroved access to clinical reventative services. Grossman (97) does not refer directly to reventative care, but talks about investment in health, which could be considered as a reventative activity. ccording to the author, each erson has a negatively inclined demand curve for health caital, which relates the marginal efficiency of caital to the stock, and an infinitely elastic suly curve. In a theoretical study, Hey and Patel (983) suggest that the uantity of reventative care urchased unambiguously increases with a fall in the rice of reventative care, a fall in the rice of curative care, an increase in the efficacy of reventative care, a decrease in the efficacy of curative care, a rise in the utility-whenhealthy function, a fall in the utility when sick function, and an increase in the discount factor (Hey and Patel 983). Zweifel et al (009) theoretically studied the otimal ath of revention and health insurance from an insurance ersective, distinguishing between observable and non-observable revention related to insurance remiums. They suggest that revention cannot be insured due to the absence of uncertainty surrounding this consumer choice. However, according to Ellis and Manning (007), if consumers are not aware of the imact of revention on the insurance remium, it is desirable for insurers to offer at least some coverage for reventative healthcare. The authors also suggest that the coinsurance rates for revention and treatment are not the same. The most obvious examle of an intervention for which utilization reuires monetary units is a vaccine. Peole are vaccinated to revent contracting a certain disease. Vaccination may be chea or exensive, and this greatly deends on the market status of the roduct, meaning the level of cometition (if any) in the market. s long as the intervention is in atent, no other roducer can rovide exactly the same roduct. While the intervention is atent rotected, the roducer acts as a monoolist if there are no other roducts with a high degree of substitutability. However, during the inatent eriod, other firms can develo and sell roducts that serve the same goal (such as other vaccines for the same disease or me-too roducts in the case of drugs), because they are not exactly the same as the first roduct, and therefore do not infringe on atent rights. In this study we consider both the case of a roduct (such as a vaccine) being the only rovider in the market, and the case of the resence of other roducts that serve the same goal of revention. 5

7 Previous studies have shown that there is cometition between different in-atent interventions. Kanavos, Costa-Font and McGuire (007) suggest that in-atent statins (used for the revention of heart disease) comete against each other. The authors suggest that cometition follows a Cournot-model attern. Danzon and Chao (000) found some evidence of within theraeutic class cometition in France, the UK, Italy and Germany. Ellison et al. (997) also found evidence of within-class cometition in the market of cehalosorins. Individuals who are insured are not ersonally affected by the cost of revention or treatment. Thus, the rice of revention deends on whether consumers are insured or not. Usually health insurance will cover costs of an intervention. However, the choice to cover reventative care deends on its cost comared to a cure. If these costs are not covered by health insurance, the individual will have to make her own decision about whether her exected utility is higher when urchasing reventative care or not. lthough the utility function of the insurer is based on the rofit function, individuals utility functions also include non-monetary factors, such as health level. This aer is organized as follows: Section resents the model and Sections 3, 4 and 5 discuss the cases of monooly, Cournot cometition and Stackelberg cometition resectively. Subsections discuss the cases of demand originating from consumers with no insurance, consumers with full insurance, and an insurer. Section 6 concludes.. The Model. Variables and definitions There are many factors that affect the rice of reventative care. Cost of roduction influences rices and the er-unit cost of roduction must be covered in order for the roduction rocess to be rofitable for the manufacturer. When the roducer has some degree of market ower, an increase in the marginal cost of roduction leads to an increase in rices. In the case of vaccines or drugs, the er-unit cost of roduction is very small. The most significant cost for vaccines is R&D fixed costs. R&D is considered a sunk cost and therefore does not affect ricing. Generic roducers are not subject to R&D costs, but are not considered in this study as we focus on in-atent markets. roducts effectiveness is also a rice determinant because it is a measure of uality: higher efficacy of revention The behaviour of one atient alone cannot change the rice of the insurance remium due to the large oulation of insured atients. evertheless, if all atients over-consume medicines this will have an effect on the rice of the remium. Each atient searately though is unlikely to restrict consumtion for this reason. 6

8 means lower future exected cost of cure. Purchasers of the roduct are willing to ay more if the exected increase in utility due the urchase increases. This will allow roducers to charge a higher rice if the roduct is exected to revent a reduction in utility (illness) with a higher robability. Price of cure also affects rice of revention. If an individual does not urchase reventative care, she has higher robabilities of becoming ill, thus urchasing curative care and exeriencing the disutility of being ill. The higher the rice of the cure, the more willing the individual is to buy reventative care. Finally, market structure also affects rices. monoolist rovider of reventative care has more market ower than when cometitors are resent. Deending on which case alies, a model for each market structure is considered. Prices differ deending on the resence of cometitors as well as the resence of insurance. For each case a different market structure alies. n individual suffers from additional disutility (aart from the monetary cost) from a state of illness. We develo a theoretical framework that we use to study under which circumstances the urchase of reventative care may lead to an increase of the utility of agents. We study how rices change with changes in effectiveness, cost of roduction, rice of cure, market structure and insurance coverage.. The baseline euations ssume there are individuals in an economy, all with health level h. ll are vulnerable to a articular disease. The disease occurs with robability i to each individual (i is the same for all individuals), with i(0,]. In case they become ill, their health level decreases by x n, (where n denotes the individual), so the new health level is h-x n. x n is not the same for all individuals. It is uniformly distributed across the oulation. In case the individual contracts the disease, the cost of cure is. Individuals can reduce the robability of becoming ill by utilising reventative care. Preventative care is rovided by a firm at rice. Consumers can choose to urchase zero or one unit of revention. Preventative care is urchased once. Purchasing an extra unit offers no extra utility. Consumers that choose revention reduce the robability of becoming ill by s (which is universal); s is a measure of effectiveness of the reventative good. The new robability of becoming ill is i-s. Therefore, even after taking reventative care, the individual might have to ay for cure ( ) with robability i-s. Effectiveness, s, ranges from zero to i, with s=0 indicating erfect ineffectiveness of reventative care and s 7

9 = i indicating erfect effectiveness. In cases that the outcome is different, we will also consider the case in which s varies among individuals, while x is assumed to be common for all. We consider a two-eriod model 3. In the first eriod the individual makes her decisions about urchasing reventative care or not, and faces the robability of getting ill in eriod. Demand for reventative care is = F( x) () where is uantity of reventative care demanded, is the oulation and F(x) is the cumulative distribution function of the worsening of health level due to illness amongst the oulation. Only eole in the uer levels of x (eole whose health worsens more when having the secific disease) will urchase reventative care. Peole with x below the reference value x* will not choose revention, since their disutility of being ill is lower. We assume that x is uniformly distributed across the oulation. For simlicity, we also make the assumtion that consumers are risk-neutral. These assumtions hel simlifying the algebra when deriving the results, without affecting the direction of the changes as a result of a change in a determinant of rice. F(x) has a minimum value of 0 and a maximum value of. For any value of x higher than, F(x) will be and for any value of x lower than 0, F(x) will be 0. The rovider of reventative care is a rofit maximizing harmaceutical firm. The firm rovides its roduct in a market, where individuals are the rimary urchasers. 4 Costs are assumed to be linear, since this simlifies the analysis without affecting the results. Thus, the rofit function of the firm is: π = ( ) ( )α () where is the rice of reventative care and α is the er unit cost of roduction, which is constant (linear cost or constant marginal cost assumtion). The first order condition for maximizing rofits is: = ( ) + ( ) - α ( ) = 0 (3) Throughout the aer we assume that rices are strictly ositive: 3 dynamic model with more than eriods could be introduced, but this would not add any insight to the model. The reason is that the goal is to see how rice adats to demand and this simlification does not affect the direction of results. 4 Costs may be covered by health insurance (deending on the model discussed below). 8

10 >0, >0 The methodology used to determine demand for reventative health care is based on the vertical differentiation model by Tirole (988). In that model, a demand function is constructed deending on how imortant higher uality is for each consumer. The main assumtion is that consumers agree over the reference ordering, but some consumers are willing to ay a higher rice than others for the same uality. In this study, consumers refer a better-exected level of health to a worse one, but they have a different level of disutility for a given disease. We now roceed to see how ricing takes lace under different circumstances. 3. One roducer - Monooly The rovider of the only roduct in a new theraeutic class acts as a monoolist in order to maximize rofits. There is no cometition from other substitutes that serve the same goal. The ricing decision is subject to consumer s demand function. 3. Demand by Consumers without health insurance If the consumer chooses the reventative care her utility is: U = h i sh x i sh i s (4) y urchasing reventative care in eriod, the healthy erson (with level of health h) reduces her utility by the rice of the roduct,. In eriod, discounted by β, her utility is the sum of the robability of becoming ill, (i-s), multilied by the health level of an ill erson (h-x) and the cost of cure ( ), lus the robability of remaining healthy, (-(i-s)), multilied by the health level of a healthy erson. h, s, i and x are constrained between 0 and. If she does not choose the reventative care, her utility is: U = h ih x ih i (5) In this case, the utility in the first eriod is the health level of a healthy erson, without any other costs, since the individual has not urchased any reventative care. Her utility in eriod, discounted by discount factor β, is the health level of a sick erson (h-x) lus the urchase or reventative care, multilied by the robability of getting ill, i, and the health level of a healthy erson, h, multilied by the robability of not becoming ill, -i. The robability of getting ill in euation (5) is reduced by s comared to euation (4), which is the reduction of the robability of getting ill due to the use of reventive care. We assume that the health level h enters the utility function linearly. This is a simlifying assumtion, 9

11 since if the health level would enter exonentially with 0<h< the analysis would become more comlicated and the changes would be towards the same direction, with only the magnitude changing. The consumer seeks to maximize her utility. Thus, she will choose revention if her utility is higher in this case rather than in the case in which she does not take revention, or when: h i sh x i sh i s h ih x ih i x (6) s (x reflects the worsening of health due to illness). So the fraction of the oulation with an x larger than will choose to take reventative care, since this is the fraction of the s oulation whose health level worsens most if affected by the disease. Peole with x below the reference value x * will not choose revention because the disutility of being affected is lower. y substituting (6) into the demand function () we can rewrite as: = F s (8) x is assumed to be distributed uniformly among the oulation so we can rewrite (8) as: = s (9) Quantity of the reventative roduct is an increasing function of the total oulation, the rice of cure, the discount factor and the effectiveness of the roduct, and a decreasing function of the rice of reventative care. From euations (8) and (9) it follows that if - F s 0 => s 0 => bs, nobody would urchase reventative care and that if - F s => s => bs( ), everybody would urchase reventative care. We roceed to see what would haen when bs bs( ). The demand function for reventative care is 0

12 = (0) s s which is euivalent to s s () The first derivative of uantity with resect to rice is: ( ) = < 0 () s y inserting (0) and () into the monoolist rofit maximization function (3) we get: s s = s s a a = 0 s (3) The rice of reventative care is an increasing function of the discount factor, the effectiveness of the roduct, the rice of cure and the er-unit cost of roduction. The artial derivatives of with resect to s, α and are: ( ) = > 0 s = > 0 a s = > 0 The more effective the good is, the lower the exected disutility originating from illness, so there is sace for higher disutility from increased exenses for urchasing revention. rise in the er-unit cost of roduction of the good will also lead to an increase in its rice, as a result of the rofit function maximization of the monoolist. Poulation size (), the initial robability of getting ill in the absence of reventative care (i) and the disutility of illness (x) have no effect on the rice of reventive care in this setting. 3. Demand by Consumers with full insurance We now consider the case of a consumer who is fully insured and exresses demand for reventative health care herself. This is not a realistic case because health insurance exresses demand as a third arty ayer and is the arty who negotiates rices with the rovider. evertheless this examle is of theoretical interest. If the consumer chooses to take reventative care, her utility is: U = h i sh x i sh (4)

13 In eriod, the consumer has the utility of a healthy erson with no health exenses because any urchase of reventative health care is fully covered. In eriod, discounted by β, her utility is the sum of the robability of becoming ill, (i-s), multilied by the health level of an ill erson (h-x), and the robability of remaining healthy, (-(i-s)), multilied by the health level of a healthy erson (h). Cost of reventative care or cure does not enter her utility, since the consumer has full health insurance and exenses for urchasing reventative care or exenses due to otential illness are fully covered by the insurer. If she chooses not to take reventive care, her utility is: U = h i( h x) ih (5) In this case, the utility in the first eriod is the health level of a healthy erson, without any other costs, as before. Her utility in eriod, discounted by discount factor β, is the health level of a sick erson (h-x) lus the urchase or reventative care, multilied by the robability of getting ill, i, and the health level of a healthy erson, h, multilied by the robability of not becoming ill, -i. The consumer will choose to urchase reventative care if the utility when taking revention is higher than the utility when not making the urchase: i sh x i sh > h i( h x) ih h sx > 0 (6) which holds for every x > 0 and s > 0. This means that the consumer will take reventative care if it has even the slightest ositive effect on her health (s > 0) and the ossible illness causes even the slightest disutility to the consumer. In this case, demand is (given that x [0, ]). Hence, demand euals the total oulation and is erfectly inelastic. Consumers do not ay for reventative care (as they are fully insured) so they demand the same amount of revention at any rice level. This can be considered as moral hazard because consumers consume more reventative care than what they would have if they were not insured and they exress demand for reventative care even if the cost is higher then the total exected cost of illness. This, of course, has some limit, as the funds of insurers are finite. Therefore, there is some maximum oint for rice. Changes in the level of effectiveness of revention (s) will not affect the rice or uantity demanded. ll consumers are strictly better off by ursuing reventative care because they do not ay for it (or because their individual urchasing behaviour does not affect health insurance contributions). The only case in which there would be a difference would be when s changes from s = 0 to s > 0, since in the first case they would be

14 indifferent between urchasing care or not and in the second case they would all demand this good. ut we have assumed that s > 0, because the roduct is suosed to have at least a marginal ositive effect. The rice of cure, would also not have any effect on demand and conseuently on the rice. Individuals will urchase the good no matter what the rice of cure is as they are always strictly better off. s long as α < max, a change in α will not affect rice or uantity. If α exceeds the maximum ossible rice, the uantity sulied will be zero. The size of oulation (), the initial robability of getting ill (i) and the disutility of illness (x) 5 again have no effect on the rice of reventive care. FIGURE In this articular monooly market, the single rovider will sell at the maximum ossible rice at which there will be demand, as long as rofits are ositive. more realistic case would be the resence of co-ayments on behalf of atients. co-ayment only for revention and no co-ayment for cure would be euivalent to case 3., with = 0 and eual with the amount of the co-ayment. The new rice function would be = s a The artial derivatives of with resect to s, α and would be: 5 Given that x > 0 3

15 = > 0 s = > 0 a If both revention and cure are subject to co-ayments, the solution would be the same as case 3., with and being the amount of co-ayment for revention and cure resectively. Conseuently, co-ayments would change the outcome from a very high rice to a more reasonable finite rice of revention. 3.3 Demand by cost minimizing insurer Demand originating from a fully insured individual is an interesting theoretical case, but in ractice it is health insurance that normally exresses demand as a third-arty ayer. Cost minimization is vital for health insurance given rising health care costs. Preventative care is costly, but may also hel avoid future costs for cure of a disease, since some insured will avoid falling ill if they consume reventative care. The insurer is interested in covering reventative costs because this decreases exected future health costs, as long as the total cost of revention does not exceed the monetary cost of cure. The variable reresenting individuals utility originating from their health level does not enter the insurer s utility function Different disutility from illness across individuals Suose disutility from illness (x) varies across individuals. This is the same assumtion made in revious cases. If the individual takes reventative care, the cost for the insurer are eual to: C ins = i s (7) This is the rice aid in eriod for reventative care, lus the cost of cure, multilied by the (reduced by s) robability of becoming ill in eriod, discounted by β. If the insured individuals choose not to take reventative care, the cost for the insurer is: C ins = i (8) This concerns only costs in eriod, since in eriod no reventative care is urchased. Costs involve the rice of cure,, multilied by the robability i of getting ill, discounted by the discount factor β. The insurer will cover the reventative care costs if 4

16 i s > i < s β (9) If this relation holds, then the insurer covers reventative care. Individuals then take all the reventive care the insurer covers because they are strictly better off by taking it without aying. Thus, demand is for rice < sβ and 0 for rice > sβ. FIGURE Given this demand function, the firm will sell reventative care only if it has nonnegative rofits. Since cost is linear, it will rovide the good only if α < = sβ. If indeed α < = sβ, the firm will suly the roduct at rice = sβ, leading to revenue maximization of * = * sβ. α > is highly unlikely in a harmaceutical market with small er unit costs. If the firm sets a higher rice, her suly and rofits will be zero. y setting a rice lower than sβ, its rofits will be lower than if the rice was sβ, since they will rovide the same uantity () at a lower rice. monoolist would sell at = sβ. This is the only oint at which marginal revenue is not zero (marginal revenue is zero for 0 < < and for > and * for =). The highest ossible difference between total revenue and total cost for the firm would be exactly at the oint where =. Thus the monoolist is willing to sell uantity at rice = sβ Different effectiveness levels across individuals We now consider the case in which effectiveness of reventative care varies across individuals. s is uniformly distributed across individuals, with s [0,], while x is 5

17 common for all consumers. We make this assumtion because this is the case in which the insurer will not urchase reventative care for everyone, but only for the consumers with a high s. In 4. and 4. we did not have to make this distinction because the results would have been the same. s above, the insurer will cover the reventative care costs if i s > i Demand for reventative care is then = F( s) Substituting s into euation () gives us: = s (0) () F which due to the assumtion of uniform distribution of s among the oulation, is euivalent to: = The fraction of the oulation that is covered increases with the cost of cure and the discount factor and decreases with the rice of revention. Euation (3) is euivalent to The first derivative of with resect to is d d () (3) (4) (5) Substituting euations (4) and (5) into the rofit maximizing euation (3) of the monoolist gives us: = 0 (6) (7) = > 0 a 6

18 = > 0 Price of reventative care increases with the rice of cure and the er-unit cost of roduction. The difference comared to the case of universal effectiveness s across individuals is that now only a fraction of the oulation receives reventative care. In the revious case, either all consumers or none received this care. n increase in the effectiveness of revention (s) would lead to an increase in its rice. The same will hold for the rice of cure,. n increase in the rice of cure will lead to an uward shift of, as the monoolist can now take advantage of the fact that revention becomes more rofitable for the insurer, so an increase in can fill in that ga. 4. Multile cometitors roviding reventative healthcare Cournot Cometition ssume only two firms articiate in the reventative care market (duooly case). oth firms, and are identical, roduce similar roducts of the same theraeutic class, have the same roduction function and enter the market simultaneously. Cost of R&D is a sunk cost, so it does not lay a role in this analysis. The ost-r&d cost functions are the same for both firms. This is the case of a Cournot duooly (Cournot 838). 4. Demand by Consumers without insurance s seen in the initial analysis in the monoolistic case (section 3.) and according to euation (6), a consumer without insurance will choose revention if her utility is higher in this case rather than in the case in which she does not take revention, or when x s (6) So the fraction of the oulation with an x larger than will choose to take s reventative care due to the fact that this is the fraction of the oulation whose health level worsens most if affected by the disease. Peole with x below the reference value will not choose revention, since the disutility of being affected is lower. Substituting in the same manner as in the revious section, gives us the following demand function 7

19 = s (8) which is euivalent to = (9) s This is the demand function and is euivalent to s (30) s s With two layers in the market, the function becomes: The rofit function for firm is: First order conditions are: ( ) s s s (3) s ( s s ( )) (3) 0 s (33) y symmetry, s fter substituting and rearranging, the euilibrium uantities are: (34) Total uantity is = * * (35) 3 s (36) Substituting into the demand function gives us rice : s s 6 (37) 3 The artial derivatives of with resect to s, α and are: = > 0 s 3 = > 0 a s = > 0 3 8

20 s exected, an increase in reventative care effectiveness (s) will trigger a rice increase. The more effective the good is, the lower the exected disutility originating from illness, so there is sace for higher disutility from increased exenses for urchasing revention. rise in the er-unit cost of roduction of the good will also lead to an increase in its rice. decrease in the rice of cure is also exected to lead to an increase in the rice of revention. If cure becomes cheaer, a roortion of the oulation will not demand reventative care for that given rice, because their exected utility will be higher than if not urchasing reventative care. This will lead the rovider of revention to decrease the rice of her roduct. The size of oulation (), the initial robability of getting ill (i) and the disutility of illness (x) have no effect on the rice of reventive care. 4. Demand by Consumers with full insurance s discussed in section 3., in this theoretical case, demand euals the whole oulation and is erfectly inelastic. Consumers do not ay for reventative care out-ofocket so they demand the same amount of revention, regardless the rice. s exlained in section 3., this is a case of moral hazard. In a uantity cometition model, such as the Cournot model, the rice would be set at the highest ossible level (theoretically an infinite rice, but in ractice a very high rice). The cometition among the two firms is in the field of uantity. In this case there are multile euilibria. There is an euilibrium if * *. ny nonnegative combination of uantities adding u to is an * * euilibrium. For examle,, 500, 500 is an euilibrium. 4.3 Demand by cost-minimizing insurer 4.3. Different disutility from illness across individuals Suose disutility from illness (x) varies across individuals. This is the same assumtion made in case 4.. The insurer will cover the reventative care costs if i s > i < s β If this holds, then the insurer covers reventative care. Individuals then take all the reventive care the insurer covers (as in section 3.3.) due to the fact that they are strictly better off by consuming it without aying (Figure ). Therefore, demand is for rice < sβ and 0 for rice > sβ. In this case, both firms will sell the roduct in the market at rice = s β, which is the rice that maximizes their rofits. Cometition is in the field 9

On Software Piracy when Piracy is Costly

On Software Piracy when Piracy is Costly Deartment of Economics Working aer No. 0309 htt://nt.fas.nus.edu.sg/ecs/ub/w/w0309.df n Software iracy when iracy is Costly Sougata oddar August 003 Abstract: The ervasiveness of the illegal coying of

More information

Piracy and Network Externality An Analysis for the Monopolized Software Industry

Piracy and Network Externality An Analysis for the Monopolized Software Industry Piracy and Network Externality An Analysis for the Monoolized Software Industry Ming Chung Chang Deartment of Economics and Graduate Institute of Industrial Economics mcchang@mgt.ncu.edu.tw Chiu Fen Lin

More information

c 2009 Je rey A. Miron 3. Examples: Linear Demand Curves and Monopoly

c 2009 Je rey A. Miron 3. Examples: Linear Demand Curves and Monopoly Lecture 0: Monooly. c 009 Je rey A. Miron Outline. Introduction. Maximizing Pro ts. Examles: Linear Demand Curves and Monooly. The Ine ciency of Monooly. The Deadweight Loss of Monooly. Price Discrimination.

More information

What is Adverse Selection. Economics of Information and Contracts Adverse Selection. Lemons Problem. Lemons Problem

What is Adverse Selection. Economics of Information and Contracts Adverse Selection. Lemons Problem. Lemons Problem What is Adverse Selection Economics of Information and Contracts Adverse Selection Levent Koçkesen Koç University In markets with erfect information all rofitable trades (those in which the value to the

More information

A Simple Model of Pricing, Markups and Market. Power Under Demand Fluctuations

A Simple Model of Pricing, Markups and Market. Power Under Demand Fluctuations A Simle Model of Pricing, Markus and Market Power Under Demand Fluctuations Stanley S. Reynolds Deartment of Economics; University of Arizona; Tucson, AZ 85721 Bart J. Wilson Economic Science Laboratory;

More information

Asymmetric Information, Transaction Cost, and. Externalities in Competitive Insurance Markets *

Asymmetric Information, Transaction Cost, and. Externalities in Competitive Insurance Markets * Asymmetric Information, Transaction Cost, and Externalities in Cometitive Insurance Markets * Jerry W. iu Deartment of Finance, University of Notre Dame, Notre Dame, IN 46556-5646 wliu@nd.edu Mark J. Browne

More information

Large firms and heterogeneity: the structure of trade and industry under oligopoly

Large firms and heterogeneity: the structure of trade and industry under oligopoly Large firms and heterogeneity: the structure of trade and industry under oligooly Eddy Bekkers University of Linz Joseh Francois University of Linz & CEPR (London) ABSTRACT: We develo a model of trade

More information

THE WELFARE IMPLICATIONS OF COSTLY MONITORING IN THE CREDIT MARKET: A NOTE

THE WELFARE IMPLICATIONS OF COSTLY MONITORING IN THE CREDIT MARKET: A NOTE The Economic Journal, 110 (Aril ), 576±580.. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 50 Main Street, Malden, MA 02148, USA. THE WELFARE IMPLICATIONS OF COSTLY MONITORING

More information

Risk and Return. Sample chapter. e r t u i o p a s d f CHAPTER CONTENTS LEARNING OBJECTIVES. Chapter 7

Risk and Return. Sample chapter. e r t u i o p a s d f CHAPTER CONTENTS LEARNING OBJECTIVES. Chapter 7 Chater 7 Risk and Return LEARNING OBJECTIVES After studying this chater you should be able to: e r t u i o a s d f understand how return and risk are defined and measured understand the concet of risk

More information

An important observation in supply chain management, known as the bullwhip effect,

An important observation in supply chain management, known as the bullwhip effect, Quantifying the Bullwhi Effect in a Simle Suly Chain: The Imact of Forecasting, Lead Times, and Information Frank Chen Zvi Drezner Jennifer K. Ryan David Simchi-Levi Decision Sciences Deartment, National

More information

Sang Hoo Bae Department of Economics Clark University 950 Main Street Worcester, MA 01610-1477 508.793.7101 sbae@clarku.edu

Sang Hoo Bae Department of Economics Clark University 950 Main Street Worcester, MA 01610-1477 508.793.7101 sbae@clarku.edu Outsourcing with Quality Cometition: Insights from a Three Stage Game Theoretic Model Sang Hoo ae Deartment of Economics Clark University 950 Main Street Worcester, M 01610-1477 508.793.7101 sbae@clarku.edu

More information

Economics 431 Fall 2003 2nd midterm Answer Key

Economics 431 Fall 2003 2nd midterm Answer Key Economics 431 Fall 2003 2nd midterm Answer Key 1) (20 oints) Big C cable comany has a local monooly in cable TV (good 1) and fast Internet (good 2). Assume that the marginal cost of roducing either good

More information

Chapter 9 Profit Maximization

Chapter 9 Profit Maximization Chater 9 Profit Maximization Economic theory normally uses the rofit maximization assumtion in studying the firm just as it uses the utility maximization assumtion for the individual consumer. This aroach

More information

Joint Production and Financing Decisions: Modeling and Analysis

Joint Production and Financing Decisions: Modeling and Analysis Joint Production and Financing Decisions: Modeling and Analysis Xiaodong Xu John R. Birge Deartment of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208,

More information

Class 4: Monopoly and Market Power. Power to affect market price or the ability to set price above marginal cost Monopoly power and monopsony power

Class 4: Monopoly and Market Power. Power to affect market price or the ability to set price above marginal cost Monopoly power and monopsony power Class 4: Monooly and Market Power. Market ower Power to affect market rice or the ability to set rice above marginal cost Monooly ower and monosony ower An examle of monosony ower: The big-3 and their

More information

IEEM 101: Inventory control

IEEM 101: Inventory control IEEM 101: Inventory control Outline of this series of lectures: 1. Definition of inventory. Examles of where inventory can imrove things in a system 3. Deterministic Inventory Models 3.1. Continuous review:

More information

Large firms and heterogeneity: the structure of trade and industry under oligopoly

Large firms and heterogeneity: the structure of trade and industry under oligopoly Large firms and heterogeneity: the structure of trade and industry under oligooly Eddy Bekkers University of Linz Joseh Francois University of Linz & CEPR (London) ABSTRACT: We develo a model with endogeneity

More information

Private Label Positioning: Vertical vs. Horizontal Differentiation from the National Brand

Private Label Positioning: Vertical vs. Horizontal Differentiation from the National Brand Private Label Positioning: Vertical vs. Horizontal Differentiation from the National Brand By S. Chan Choi and Anne T. Coughlan May 004 Please do not uote or distribute without ermission. Marketing Deartment,

More information

Reference Pricing with Endogenous Generic Entry

Reference Pricing with Endogenous Generic Entry Reference Pricing with Endogenous Generic Entry Kurt R. Brekke, Chiara Canta, Odd Rune Straume Aril 18, 2016 Abstract Reference ricing intends to reduce harmaceutical exenditures by increasing demand elasticity

More information

I will make some additional remarks to my lecture on Monday. I think the main

I will make some additional remarks to my lecture on Monday. I think the main Jon Vislie; august 04 Hand out EON 4335 Economics of Banking Sulement to the the lecture on the Diamond Dybvig model I will make some additional remarks to my lecture on onday. I think the main results

More information

Monopoly. Monopoly. Causes of Monopolies. Profit Maximization. ECON 370: Microeconomic Theory. Summer 2004 Rice University Stanley Gilbert

Monopoly. Monopoly. Causes of Monopolies. Profit Maximization. ECON 370: Microeconomic Theory. Summer 2004 Rice University Stanley Gilbert Monool market with a single seller Monool ECON 370: Microeconomic Theor Firm demand = market demand Firm demand is downward sloing Monoolist can alter market rice b adjusting its own outut level Summer

More information

Synopsys RURAL ELECTRICATION PLANNING SOFTWARE (LAPER) Rainer Fronius Marc Gratton Electricité de France Research and Development FRANCE

Synopsys RURAL ELECTRICATION PLANNING SOFTWARE (LAPER) Rainer Fronius Marc Gratton Electricité de France Research and Development FRANCE RURAL ELECTRICATION PLANNING SOFTWARE (LAPER) Rainer Fronius Marc Gratton Electricité de France Research and Develoment FRANCE Synosys There is no doubt left about the benefit of electrication and subsequently

More information

Effect Sizes Based on Means

Effect Sizes Based on Means CHAPTER 4 Effect Sizes Based on Means Introduction Raw (unstardized) mean difference D Stardized mean difference, d g Resonse ratios INTRODUCTION When the studies reort means stard deviations, the referred

More information

Interbank Market and Central Bank Policy

Interbank Market and Central Bank Policy Federal Reserve Bank of New York Staff Reorts Interbank Market and Central Bank Policy Jung-Hyun Ahn Vincent Bignon Régis Breton Antoine Martin Staff Reort No. 763 January 206 This aer resents reliminary

More information

Dynamics of Open Source Movements

Dynamics of Open Source Movements Dynamics of Oen Source Movements Susan Athey y and Glenn Ellison z January 2006 Abstract This aer considers a dynamic model of the evolution of oen source software rojects, focusing on the evolution of

More information

Confidence Intervals for Capture-Recapture Data With Matching

Confidence Intervals for Capture-Recapture Data With Matching Confidence Intervals for Cature-Recature Data With Matching Executive summary Cature-recature data is often used to estimate oulations The classical alication for animal oulations is to take two samles

More information

Compensating Fund Managers for Risk-Adjusted Performance

Compensating Fund Managers for Risk-Adjusted Performance Comensating Fund Managers for Risk-Adjusted Performance Thomas S. Coleman Æquilibrium Investments, Ltd. Laurence B. Siegel The Ford Foundation Journal of Alternative Investments Winter 1999 In contrast

More information

On-the-Job Search, Work Effort and Hyperbolic Discounting

On-the-Job Search, Work Effort and Hyperbolic Discounting On-the-Job Search, Work Effort and Hyerbolic Discounting Thomas van Huizen March 2010 - Preliminary draft - ABSTRACT This aer assesses theoretically and examines emirically the effects of time references

More information

The HIV Epidemic: What kind of vaccine are we looking for?

The HIV Epidemic: What kind of vaccine are we looking for? adia Abuelezam MATH 181 May 5, 2008 The HIV Eidemic: What kind of vaccine are we looking for? 1 Problem Background 33.2 million eole are living with HIV and AIDS worldwide [4]. Human Immunodeficiency Virus

More information

agents (believe they) cannot influence the market price agents have all relevant information What happens when neither (i) nor (ii) holds?

agents (believe they) cannot influence the market price agents have all relevant information What happens when neither (i) nor (ii) holds? Information and strategic interaction Assumtions of erfect cometition: (i) (ii) agents (believe they) cannot influence the market rice agents have all relevant information What haens when neither (i) nor

More information

Index Numbers OPTIONAL - II Mathematics for Commerce, Economics and Business INDEX NUMBERS

Index Numbers OPTIONAL - II Mathematics for Commerce, Economics and Business INDEX NUMBERS Index Numbers OPTIONAL - II 38 INDEX NUMBERS Of the imortant statistical devices and techniques, Index Numbers have today become one of the most widely used for judging the ulse of economy, although in

More information

Multiple-Project Financing with Informed Trading * Salvatore Cantale IMD International. Dmitry Lukin New Economic School. Abstract

Multiple-Project Financing with Informed Trading * Salvatore Cantale IMD International. Dmitry Lukin New Economic School. Abstract The ournal of Entrereneurial Finance Volume 6 Number ring 0-8 Coyright 0 cademy of Entrereneurial Finance nc. ll rights reserved. N: 55-9570 Multile-Project Financing with nformed Trading * alvatore Cantale

More information

Managing specific risk in property portfolios

Managing specific risk in property portfolios Managing secific risk in roerty ortfolios Andrew Baum, PhD University of Reading, UK Peter Struemell OPC, London, UK Contact author: Andrew Baum Deartment of Real Estate and Planning University of Reading

More information

F inding the optimal, or value-maximizing, capital

F inding the optimal, or value-maximizing, capital Estimating Risk-Adjusted Costs of Financial Distress by Heitor Almeida, University of Illinois at Urbana-Chamaign, and Thomas Philion, New York University 1 F inding the otimal, or value-maximizing, caital

More information

An inventory control system for spare parts at a refinery: An empirical comparison of different reorder point methods

An inventory control system for spare parts at a refinery: An empirical comparison of different reorder point methods An inventory control system for sare arts at a refinery: An emirical comarison of different reorder oint methods Eric Porras a*, Rommert Dekker b a Instituto Tecnológico y de Estudios Sueriores de Monterrey,

More information

Machine Learning with Operational Costs

Machine Learning with Operational Costs Journal of Machine Learning Research 14 (2013) 1989-2028 Submitted 12/11; Revised 8/12; Published 7/13 Machine Learning with Oerational Costs Theja Tulabandhula Deartment of Electrical Engineering and

More information

Two-resource stochastic capacity planning employing a Bayesian methodology

Two-resource stochastic capacity planning employing a Bayesian methodology Journal of the Oerational Research Society (23) 54, 1198 128 r 23 Oerational Research Society Ltd. All rights reserved. 16-5682/3 $25. www.algrave-journals.com/jors Two-resource stochastic caacity lanning

More information

Penalty Interest Rates, Universal Default, and the Common Pool Problem of Credit Card Debt

Penalty Interest Rates, Universal Default, and the Common Pool Problem of Credit Card Debt Penalty Interest Rates, Universal Default, and the Common Pool Problem of Credit Card Debt Lawrence M. Ausubel and Amanda E. Dawsey * February 2009 Preliminary and Incomlete Introduction It is now reasonably

More information

DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES

DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES ISSN 1471-0498 DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES MARGINAL COST PRICING VERSUS INSURANCE Simon Cowan Number 102 May 2002 Manor Road Building, Oxford OX1 3UQ Marginal cost ricing versus insurance

More information

Consumer Price Index Dynamics in a Small Open Economy: A Structural Time Series Model for Luxembourg

Consumer Price Index Dynamics in a Small Open Economy: A Structural Time Series Model for Luxembourg Aka and Pieretii, International Journal of Alied Economics, 5(, March 2008, -3 Consumer Price Index Dynamics in a Small Oen Economy: A Structural Time Series Model for Luxembourg Bédia F. Aka * and P.

More information

Price Discrimination in the Digital Economy*

Price Discrimination in the Digital Economy* Price Discrimination in the Digital Economy Drew Fudenberg (Harvard University) J. Miguel Villas-Boas (University of California, Berkeley) May 2012 ABSTRACT With the develoments in information technology

More information

Risk in Revenue Management and Dynamic Pricing

Risk in Revenue Management and Dynamic Pricing OPERATIONS RESEARCH Vol. 56, No. 2, March Aril 2008,. 326 343 issn 0030-364X eissn 1526-5463 08 5602 0326 informs doi 10.1287/ore.1070.0438 2008 INFORMS Risk in Revenue Management and Dynamic Pricing Yuri

More information

The Competitiveness Impacts of Climate Change Mitigation Policies

The Competitiveness Impacts of Climate Change Mitigation Policies The Cometitiveness Imacts of Climate Change Mitigation Policies Joseh E. Aldy William A. Pizer 2011 RPP-2011-08 Regulatory Policy Program Mossavar-Rahmani Center for Business and Government Harvard Kennedy

More information

Multiperiod Portfolio Optimization with General Transaction Costs

Multiperiod Portfolio Optimization with General Transaction Costs Multieriod Portfolio Otimization with General Transaction Costs Victor DeMiguel Deartment of Management Science and Oerations, London Business School, London NW1 4SA, UK, avmiguel@london.edu Xiaoling Mei

More information

Corporate Compliance Policy

Corporate Compliance Policy Cororate Comliance Policy English Edition FOREWORD Dear Emloyees, The global nature of Bayer s oerations means that our activities are subject to a wide variety of statutory regulations and standards

More information

Applications of Regret Theory to Asset Pricing

Applications of Regret Theory to Asset Pricing Alications of Regret Theory to Asset Pricing Anna Dodonova * Henry B. Tiie College of Business, University of Iowa Iowa City, Iowa 52242-1000 Tel.: +1-319-337-9958 E-mail address: anna-dodonova@uiowa.edu

More information

A Customer Management Dilemma: When Is It Profitable to Reward Own Customers?

A Customer Management Dilemma: When Is It Profitable to Reward Own Customers? Customer Management Dilemma: When Is It Profitable to Reward Own Customers? Jiwoong Shin and K. Sudhir * Yale University Forthcoming in Marketing Science. * The authors thank the editor, the area editor,

More information

Comparing Dissimilarity Measures for Symbolic Data Analysis

Comparing Dissimilarity Measures for Symbolic Data Analysis Comaring Dissimilarity Measures for Symbolic Data Analysis Donato MALERBA, Floriana ESPOSITO, Vincenzo GIOVIALE and Valentina TAMMA Diartimento di Informatica, University of Bari Via Orabona 4 76 Bari,

More information

Complex Conjugation and Polynomial Factorization

Complex Conjugation and Polynomial Factorization Comlex Conjugation and Polynomial Factorization Dave L. Renfro Summer 2004 Central Michigan University I. The Remainder Theorem Let P (x) be a olynomial with comlex coe cients 1 and r be a comlex number.

More information

NBER WORKING PAPER SERIES HOW MUCH OF CHINESE EXPORTS IS REALLY MADE IN CHINA? ASSESSING DOMESTIC VALUE-ADDED WHEN PROCESSING TRADE IS PERVASIVE

NBER WORKING PAPER SERIES HOW MUCH OF CHINESE EXPORTS IS REALLY MADE IN CHINA? ASSESSING DOMESTIC VALUE-ADDED WHEN PROCESSING TRADE IS PERVASIVE NBER WORKING PAPER SERIES HOW MUCH OF CHINESE EXPORTS IS REALLY MADE IN CHINA? ASSESSING DOMESTIC VALUE-ADDED WHEN PROCESSING TRADE IS PERVASIVE Robert Kooman Zhi Wang Shang-Jin Wei Working Paer 14109

More information

St.George - ACCI SMALL BUSINESS SURVEY August 2007

St.George - ACCI SMALL BUSINESS SURVEY August 2007 Release Date: 21 August 2007 St.George - ACCI SMALL BUSINESS SURVEY August 2007 Identifying National Trends and Conditions for the Sector Working in Partnershi for the future of Australian Business St.George

More information

The Graphical Method. Lecture 1

The Graphical Method. Lecture 1 References: Anderson, Sweeney, Williams: An Introduction to Management Science - quantitative aroaches to decision maing 7 th ed Hamdy A Taha: Oerations Research, An Introduction 5 th ed Daellenbach, George,

More information

CRITICAL AVIATION INFRASTRUCTURES VULNERABILITY ASSESSMENT TO TERRORIST THREATS

CRITICAL AVIATION INFRASTRUCTURES VULNERABILITY ASSESSMENT TO TERRORIST THREATS Review of the Air Force Academy No (23) 203 CRITICAL AVIATION INFRASTRUCTURES VULNERABILITY ASSESSMENT TO TERRORIST THREATS Cătălin CIOACĂ Henri Coandă Air Force Academy, Braşov, Romania Abstract: The

More information

A graphical introduction to the budget constraint and utility maximization

A graphical introduction to the budget constraint and utility maximization EC 35: ntermediate Microeconomics, Lecture 4 Economics 35: ntermediate Microeconomics Notes and Assignment Chater 4: tilit Maimization and Choice This chater discusses how consumers make consumtion decisions

More information

An optimal batch size for a JIT manufacturing system

An optimal batch size for a JIT manufacturing system Comuters & Industrial Engineering 4 (00) 17±136 www.elsevier.com/locate/dsw n otimal batch size for a JIT manufacturing system Lutfar R. Khan a, *, Ruhul. Sarker b a School of Communications and Informatics,

More information

Modeling Directions of Technical Change in Agricultural Sector *

Modeling Directions of Technical Change in Agricultural Sector * Modeling Directions of Technical Change in gricultural Sector * Orachos aasintuwong rtachinda ** RE Working Paer o. 2554/ (June 20) * This aer is written during the author s visit to Graz Schumeter Centre,

More information

Title: Stochastic models of resource allocation for services

Title: Stochastic models of resource allocation for services Title: Stochastic models of resource allocation for services Author: Ralh Badinelli,Professor, Virginia Tech, Deartment of BIT (235), Virginia Tech, Blacksburg VA 2461, USA, ralhb@vt.edu Phone : (54) 231-7688,

More information

The impact of metadata implementation on webpage visibility in search engine results (Part II) q

The impact of metadata implementation on webpage visibility in search engine results (Part II) q Information Processing and Management 41 (2005) 691 715 www.elsevier.com/locate/inforoman The imact of metadata imlementation on webage visibility in search engine results (Part II) q Jin Zhang *, Alexandra

More information

Outsourcing and Technological Innovations: A Firm-Level Analysis

Outsourcing and Technological Innovations: A Firm-Level Analysis DISCUSSION PAPER SERIES IZA DP No. 3334 Outsourcing and Technological Innovations: A Firm-Level Analysis Ann Bartel Saul Lach Nachum Sicherman February 2008 Forschungsinstitut zur Zuunft der Arbeit Institute

More information

5 A recent paper by Courbage and Zweifel (2011) suggests to look at intra-family moral

5 A recent paper by Courbage and Zweifel (2011) suggests to look at intra-family moral Introduction Long-term care has been increasingly becoming a "hot" toic over the last years, and its imortance is redicted to grow even more in the coming decades. Long-term care is the care for eole who

More information

An Introduction to Risk Parity Hossein Kazemi

An Introduction to Risk Parity Hossein Kazemi An Introduction to Risk Parity Hossein Kazemi In the aftermath of the financial crisis, investors and asset allocators have started the usual ritual of rethinking the way they aroached asset allocation

More information

CFRI 3,4. Zhengwei Wang PBC School of Finance, Tsinghua University, Beijing, China and SEBA, Beijing Normal University, Beijing, China

CFRI 3,4. Zhengwei Wang PBC School of Finance, Tsinghua University, Beijing, China and SEBA, Beijing Normal University, Beijing, China The current issue and full text archive of this journal is available at www.emeraldinsight.com/2044-1398.htm CFRI 3,4 322 constraints and cororate caital structure: a model Wuxiang Zhu School of Economics

More information

C-Bus Voltage Calculation

C-Bus Voltage Calculation D E S I G N E R N O T E S C-Bus Voltage Calculation Designer note number: 3-12-1256 Designer: Darren Snodgrass Contact Person: Darren Snodgrass Aroved: Date: Synosis: The guidelines used by installers

More information

The Economics of the Cloud: Price Competition and Congestion

The Economics of the Cloud: Price Competition and Congestion Submitted to Oerations Research manuscrit The Economics of the Cloud: Price Cometition and Congestion Jonatha Anselmi Basque Center for Alied Mathematics, jonatha.anselmi@gmail.com Danilo Ardagna Di. di

More information

Rejuvenating the Supply Chain by Benchmarking using Fuzzy Cross-Boundary Performance Evaluation Approach

Rejuvenating the Supply Chain by Benchmarking using Fuzzy Cross-Boundary Performance Evaluation Approach ICSI International Journal of Engineering and echnology, Vol.2, o.6, December 2 ISS: 793-8236 Rejuvenating the Suly Chain by Benchmarking using uzzy Cross-Boundary erformance Evaluation roach RU SUIL BIDU,

More information

An actuarial approach to pricing Mortgage Insurance considering simultaneously mortgage default and prepayment

An actuarial approach to pricing Mortgage Insurance considering simultaneously mortgage default and prepayment An actuarial aroach to ricing Mortgage Insurance considering simultaneously mortgage default and reayment Jesús Alan Elizondo Flores Comisión Nacional Bancaria y de Valores aelizondo@cnbv.gob.mx Valeria

More information

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION San Diego Gas & Electric Comany, ) EL00-95-075 Comlainant, ) ) v. ) ) ) Sellers of Energy and Ancillary Services ) Docket Nos. Into Markets

More information

DAY-AHEAD ELECTRICITY PRICE FORECASTING BASED ON TIME SERIES MODELS: A COMPARISON

DAY-AHEAD ELECTRICITY PRICE FORECASTING BASED ON TIME SERIES MODELS: A COMPARISON DAY-AHEAD ELECTRICITY PRICE FORECASTING BASED ON TIME SERIES MODELS: A COMPARISON Rosario Esínola, Javier Contreras, Francisco J. Nogales and Antonio J. Conejo E.T.S. de Ingenieros Industriales, Universidad

More information

Large-Scale IP Traceback in High-Speed Internet: Practical Techniques and Theoretical Foundation

Large-Scale IP Traceback in High-Speed Internet: Practical Techniques and Theoretical Foundation Large-Scale IP Traceback in High-Seed Internet: Practical Techniques and Theoretical Foundation Jun Li Minho Sung Jun (Jim) Xu College of Comuting Georgia Institute of Technology {junli,mhsung,jx}@cc.gatech.edu

More information

Time-Cost Trade-Offs in Resource-Constraint Project Scheduling Problems with Overlapping Modes

Time-Cost Trade-Offs in Resource-Constraint Project Scheduling Problems with Overlapping Modes Time-Cost Trade-Offs in Resource-Constraint Proect Scheduling Problems with Overlaing Modes François Berthaut Robert Pellerin Nathalie Perrier Adnène Hai February 2011 CIRRELT-2011-10 Bureaux de Montréal

More information

On Multicast Capacity and Delay in Cognitive Radio Mobile Ad-hoc Networks

On Multicast Capacity and Delay in Cognitive Radio Mobile Ad-hoc Networks On Multicast Caacity and Delay in Cognitive Radio Mobile Ad-hoc Networks Jinbei Zhang, Yixuan Li, Zhuotao Liu, Fan Wu, Feng Yang, Xinbing Wang Det of Electronic Engineering Det of Comuter Science and Engineering

More information

Equilibrium price dispersion under demand uncertainty: the roles of costly capacity and market structure

Equilibrium price dispersion under demand uncertainty: the roles of costly capacity and market structure RAND Journal of Economics Vol. 30, No. 4, Winter 1999. 632 660 Equilibrium rice disersion under demand uncertainty: the roles of costly caacity and market structure James D. Dana, Jr.* When caacity is

More information

Loglikelihood and Confidence Intervals

Loglikelihood and Confidence Intervals Stat 504, Lecture 3 Stat 504, Lecture 3 2 Review (contd.): Loglikelihood and Confidence Intervals The likelihood of the samle is the joint PDF (or PMF) L(θ) = f(x,.., x n; θ) = ny f(x i; θ) i= Review:

More information

The fast Fourier transform method for the valuation of European style options in-the-money (ITM), at-the-money (ATM) and out-of-the-money (OTM)

The fast Fourier transform method for the valuation of European style options in-the-money (ITM), at-the-money (ATM) and out-of-the-money (OTM) Comutational and Alied Mathematics Journal 15; 1(1: 1-6 Published online January, 15 (htt://www.aascit.org/ournal/cam he fast Fourier transform method for the valuation of Euroean style otions in-the-money

More information

Re-Dispatch Approach for Congestion Relief in Deregulated Power Systems

Re-Dispatch Approach for Congestion Relief in Deregulated Power Systems Re-Disatch Aroach for Congestion Relief in Deregulated ower Systems Ch. Naga Raja Kumari #1, M. Anitha 2 #1, 2 Assistant rofessor, Det. of Electrical Engineering RVR & JC College of Engineering, Guntur-522019,

More information

COST CALCULATION IN COMPLEX TRANSPORT SYSTEMS

COST CALCULATION IN COMPLEX TRANSPORT SYSTEMS OST ALULATION IN OMLEX TRANSORT SYSTEMS Zoltán BOKOR 1 Introduction Determining the real oeration and service costs is essential if transort systems are to be lanned and controlled effectively. ost information

More information

Jena Research Papers in Business and Economics

Jena Research Papers in Business and Economics Jena Research Paers in Business and Economics A newsvendor model with service and loss constraints Werner Jammernegg und Peter Kischka 21/2008 Jenaer Schriften zur Wirtschaftswissenschaft Working and Discussion

More information

We are going to delve into some economics today. Specifically we are going to talk about production and returns to scale.

We are going to delve into some economics today. Specifically we are going to talk about production and returns to scale. Firms and Production We are going to delve into some economics today. Secifically we are going to talk aout roduction and returns to scale. firm - an organization that converts inuts such as laor, materials,

More information

EFFECTS OF FEDERAL RISK MANAGEMENT PROGRAMS ON INVESTMENT, PRODUCTION, AND CONTRACT DESIGN UNDER UNCERTAINTY. A Dissertation SANGTAEK SEO

EFFECTS OF FEDERAL RISK MANAGEMENT PROGRAMS ON INVESTMENT, PRODUCTION, AND CONTRACT DESIGN UNDER UNCERTAINTY. A Dissertation SANGTAEK SEO EFFECTS OF FEDERAL RISK MANAGEMENT PROGRAMS ON INVESTMENT, PRODUCTION, AND CONTRACT DESIGN UNDER UNCERTAINTY A Dissertation by SANGTAEK SEO Submitted to the Office of Graduate Studies of Texas A&M University

More information

Value based trading of real assets in shipping under stochastic freight rates

Value based trading of real assets in shipping under stochastic freight rates Value based trading of real assets in shiing under stochastic freight rates Sigbjørn Sødal Agder University College, School of Management Steen Koekebakker Agder University College, School of Management

More information

Chapter 3. Special Techniques for Calculating Potentials. r ( r ' )dt ' ( ) 2

Chapter 3. Special Techniques for Calculating Potentials. r ( r ' )dt ' ( ) 2 Chater 3. Secial Techniues for Calculating Potentials Given a stationary charge distribution r( r ) we can, in rincile, calculate the electric field: E ( r ) Ú Dˆ r Dr r ( r ' )dt ' 2 where Dr r '-r. This

More information

Capital, Systemic Risk, Insurance Prices and Regulation

Capital, Systemic Risk, Insurance Prices and Regulation Caital, Systemic Risk, Insurance Prices and Regulation Ajay Subramanian J. Mack Robinson College of Business Georgia State University asubramanian@gsu.edu Jinjing Wang J. Mack Robinson College of Business

More information

Service Network Design with Asset Management: Formulations and Comparative Analyzes

Service Network Design with Asset Management: Formulations and Comparative Analyzes Service Network Design with Asset Management: Formulations and Comarative Analyzes Jardar Andersen Teodor Gabriel Crainic Marielle Christiansen October 2007 CIRRELT-2007-40 Service Network Design with

More information

The risk of using the Q heterogeneity estimator for software engineering experiments

The risk of using the Q heterogeneity estimator for software engineering experiments Dieste, O., Fernández, E., García-Martínez, R., Juristo, N. 11. The risk of using the Q heterogeneity estimator for software engineering exeriments. The risk of using the Q heterogeneity estimator for

More information

On the predictive content of the PPI on CPI inflation: the case of Mexico

On the predictive content of the PPI on CPI inflation: the case of Mexico On the redictive content of the PPI on inflation: the case of Mexico José Sidaoui, Carlos Caistrán, Daniel Chiquiar and Manuel Ramos-Francia 1 1. Introduction It would be natural to exect that shocks to

More information

Separating Trading and Banking: Consequences for Financial Stability

Separating Trading and Banking: Consequences for Financial Stability Searating Trading and Banking: Consequences for Financial Stability Hendrik Hakenes University of Bonn, Max Planck Institute Bonn, and CEPR Isabel Schnabel Johannes Gutenberg University Mainz, Max Planck

More information

Chapter Three. Topics To Be Covered

Chapter Three. Topics To Be Covered Chater Three Alying the Sulyand-Demand Model Toics To Be Covered How the shaes of demand and suly curves matter? Sensitivity of quantity demanded to rice. Sensitivity of quantity sulied to rice. Long run

More information

Cash-in-the-Market Pricing and Optimal Bank Bailout Policy 1

Cash-in-the-Market Pricing and Optimal Bank Bailout Policy 1 Cash-in-the-Maret Pricing and Otimal Ban Bailout Policy 1 Viral V. Acharya 2 London Business School and CEPR Tanju Yorulmazer 3 Ban of England J.E.L. Classification: G21, G28, G38, E58, D62. Keywords:

More information

Working Paper Series

Working Paper Series Working Paer Series Measurement Errors in Jaanese Consumer Price Index Shigenori Shiratsuka Working Paers Series Research Deartment (WP-99-2) Federal Reserve Bank of Chicago Measurement Errors in Jaanese

More information

Variations on the Gambler s Ruin Problem

Variations on the Gambler s Ruin Problem Variations on the Gambler s Ruin Problem Mat Willmott December 6, 2002 Abstract. This aer covers the history and solution to the Gambler s Ruin Problem, and then exlores the odds for each layer to win

More information

OPTIMAL EXCHANGE BETTING STRATEGY FOR WIN-DRAW-LOSS MARKETS

OPTIMAL EXCHANGE BETTING STRATEGY FOR WIN-DRAW-LOSS MARKETS OPTIA EXCHANGE ETTING STRATEGY FOR WIN-DRAW-OSS ARKETS Darren O Shaughnessy a,b a Ranking Software, elbourne b Corresonding author: darren@rankingsoftware.com Abstract Since the etfair betting exchange

More information

CANADIAN WATER SECURITY ASSESSMENT FRAMEWORK: TOOLS FOR ASSESSING WATER SECURITY AND IMPROVING WATERSHED GOVERNANCE

CANADIAN WATER SECURITY ASSESSMENT FRAMEWORK: TOOLS FOR ASSESSING WATER SECURITY AND IMPROVING WATERSHED GOVERNANCE CANADIAN WATER SECURITY ASSESSMENT FRAMEWORK: TOOLS FOR ASSESSING WATER SECURITY AND IMPROVING WATERSHED GOVERNANCE KAREN BAKKER, DEPARTMENT OF GEOGRAPHY, UNIVERSITY OF BRITISH COLUMBIA DIANA ALLEN, DEPARTMENT

More information

Web Application Scalability: A Model-Based Approach

Web Application Scalability: A Model-Based Approach Coyright 24, Software Engineering Research and Performance Engineering Services. All rights reserved. Web Alication Scalability: A Model-Based Aroach Lloyd G. Williams, Ph.D. Software Engineering Research

More information

A Multivariate Statistical Analysis of Stock Trends. Abstract

A Multivariate Statistical Analysis of Stock Trends. Abstract A Multivariate Statistical Analysis of Stock Trends Aril Kerby Alma College Alma, MI James Lawrence Miami University Oxford, OH Abstract Is there a method to redict the stock market? What factors determine

More information

Participation in Farm Markets in Rural Northwest Pakistan: A Regression Analysis

Participation in Farm Markets in Rural Northwest Pakistan: A Regression Analysis Pak. J. Commer. Soc. Sci. 2012 Vol. 6 (2), 348-356 Particiation in Farm Markets in Rural Northwest Pakistan: A Regression Analysis Inayatullah Jan Assistant Professor of Rural Develoment, Institute of

More information

6.042/18.062J Mathematics for Computer Science December 12, 2006 Tom Leighton and Ronitt Rubinfeld. Random Walks

6.042/18.062J Mathematics for Computer Science December 12, 2006 Tom Leighton and Ronitt Rubinfeld. Random Walks 6.042/8.062J Mathematics for Comuter Science December 2, 2006 Tom Leighton and Ronitt Rubinfeld Lecture Notes Random Walks Gambler s Ruin Today we re going to talk about one-dimensional random walks. In

More information

Population Genetics I

Population Genetics I Poulation Genetics I The material resented here considers a single diloid genetic locus, ith to alleles A and a; their relative frequencies in the oulation ill be denoted as and q (ith q 1 ). Hardy-Weinberg

More information

for UK industrial and scientific companies managed by Business Marketing Online

for UK industrial and scientific companies managed by Business Marketing Online for UK industrial and scientific comanies managed by Business Marketing Online This is a Google AdWords advertisement and so is this... and so is this......advertising with Google Adwords is now essential.

More information

Pinhole Optics. OBJECTIVES To study the formation of an image without use of a lens.

Pinhole Optics. OBJECTIVES To study the formation of an image without use of a lens. Pinhole Otics Science, at bottom, is really anti-intellectual. It always distrusts ure reason and demands the roduction of the objective fact. H. L. Mencken (1880-1956) OBJECTIVES To study the formation

More information