Scarcity and appropriative competition

This paper formalizes the commonsensical hypothesis that resource scarcity causes a large allocation of time and effort to appropriative competition. Our main innovation is to model explicitly the positive intertemporal effect of consumption on the probability of survival. The critical assumption is that this effect becomes stronger as resources become scarcer. We also show that anticipated future resource abundance increases the incremental value of survival and, consequently, amplifies the current allocation of time and effort to appropriative competition. Interestingly, if resources are currently scarce, then larger anticipated future abundance can cause a big enough increase in the time and effort allocated to appropriative competition to result in a decrease in the sum of current and expected future utility, a “paradox of anticipated abundance”.     

Finding a lasting cure for U.S. health care

In "Making Competition in Health Care Work" (July-August 1994), Elizabeth Olmsted Teisberg, Michael E. Porter, and Gregory B. Brown ask a question that has been absent from the national debate on health care reform: How can the United States achieve sustained cost reductions while at the same time maintaining quality of care? The authors argue that innovation driven by rigorous competition is the key to successful reform. A lasting cure for health care in the United States should include four basic elements: corrected incentives to spur productive competition, universal insurance to secure economic efficiency, relevant information to ensure meaningful choice, and innovation to guarantee dynamic improvement. In this issue's Perspectives section, eleven experts examine the current state of the health care system and offer their views on the shape that reform should take. Some excerpts: "On the road to innovation, let us not forget to develop the tools that allow physicians, payers, and patients to make better decisions." I. Steven Udvarhelyi; "Health care is not a product or service that can be standardized, packaged, marketed, or adequately judged by consumers according to quality and price." Arnold S. Relman; "Just as antitrust laws are the wise restraints that make competition free in other sectors of the economy, so the right kind of managed competition can work well in health care." Edward M. Kennedy "Biomedical research should be considered primarily an investment in the national economic well-being with additional humanitarian benefits." Elizabeth Marincola.     

Optimization Modeling for Logistics: Options and Implementations

Logistics optimization has significantly grown in popularity over the last few decades. Improvements in computing power, modeling software, and the willingness of companies to invest time in the modeling effort have allowed models that were once too unwieldy to solve to optimality to be solved quickly. This has led to a more wide‐spread recognition by logistics managers of the potential advantages of using optimization. The scope of logistics optimization in companies and organizations has expanded to address strategic, tactical, operational, and collaborative decision making. Spreadsheets, an analytical tool familiar to managers, have played a crucial role in the expanded modeling efforts of companies. Although optimization’s role in logistics has grown tremendously, there still are areas that remain to be explored that will allow it to achieve an even larger and more successful role in the management of companies. Additionally, there are some models that are still too large or too complex to currently solve to optimality, despite the advances in computing power and modeling/solving software.     

Predation and accumulation

This article incorporates the economic theory of predation into the theory of economic growth. The analytical framework is a general-equilibrium model of the interaction between two dynasties: a potential predator and its prey. We find that the rate of accumulation of capital and the security of property are positively related only for generations of the prey dynasty that tolerate predation. Generations of the prey dynasty that choose to deter predation, even though their property is perfectly secure, accumulate productive capital more slowly than the preceding generations that tolerated predation.     

Border tax adjustments: Do they distort trade?

A familiar proposition asserting the trade-neutrality of uniform, indirect taxes under both the origin and destination principles is re-examined in the context of a world with trade in intermediate goods. A uniform, general sales tax is shown to be trade-neutral under the destination principle, but trade-distorting under the origin principle. A ‘stage of processing’ value added tax is nondistorting under either border tax adjustment principle. The discussion is then related to a proposed change in GATT rules that would require origin principle administration of the European value added tax.     

Imports as a cause of injury: The case of the U.S. steel industry

This paper develops a method for assessing whether or not imports have been the most significant cause of injury to a U.S. industry. Such a determination is required under the 'escape clause' provisions (Section 201) of the Trade Act of 1974. The method is applied to the case of the U.S. steel industry, which recently petitioned the I.T.C. for import relief. We find that relief is not warranted if the relevant period is taken to be 1976–1983, as specified in the industry's petition. The results are less clear for the shorter period from 1979 to 1983.     

Is More Information Always Better? An Experimental Study of Charitable Giving and Hurricane Katrina

We report results of an experiment designed to assess the impact of Hurricane Katrina on the pattern and level of charitable contributions of donors. The study includes an experimental measure of charitable giving and targets three charities: the American Red Cross, the Salvation Army, and Oxfam International. In the experiment subjects make allocation decisions from three endowments ($10, $20, and $50) and with four different matching subsidies (0%, 25%, 50%, and 100%), with the matching amount provided by the experimenter. Two locations (Texas and Minnesota) and two information conditions are used. Survey measures of sympathy, risk perceptions, and perceptions of Katrina victims are also collected. The probability and amount of giving are responsive to the experimental design parameters—the endowment and match. We find evidence of “Katrina overload” as those closest to the disaster respond negatively to Katrina-related priming information. Perceptions of the psychological attitudes of the victims of the disaster have a significant effect on the amount given.     

Are there economies of scale in underwriting fees? Evidence of rising external financing costs

This study examines the behavior of spreads paid in firm underwrittenseasoned common stock offerings and straight bond offerings.Estimates indicate that up to 85% of the spread is variablecost and that the marginal spread is rising. Further, offeringsthat are likely to require greater underwriting services encounterhigher marginal spreads. These findings are consistent withthere being a family of U-shaped spreads, with lower qualityofferings priced on higher spreads, unlike the economies ofscale view of spreads. They agree with the views that underwritersprovide valuable services and that the marginal cost of externalfinance is rising.