Cheddar or Swiss? How strong are your barriers?

This article describes a company's experience with process safety metrics and describes systematic methods to improve safety performance. As a result of a major accident, an internal investigation identified that although a site may have numerous measures for tracking operational and safety performance, these measures may not focus on leading indicators that could provide early warning of potential major incidents. To systematically reduce incidents, especially, low probability high consequence process safety events, it is necessary to focus on prevention and specifically the strength of the barriers. The approach described in this article, therefore, aims to create a combination of Process Safety Performance Indicators that lead to stronger more robust barriers. While industrial history tells us that such high consequence events are infrequent, this significant process safety risk is always present in production operations, and thus needs to be continuously assessed and reduced through systematic safety management. Within one company, this recognition has resulted in a substantial strengthening of process safety risk management through a more comprehensive system of controls embedded within its new Operating Management System, which is being implemented at the site level across all of its operations globally. This article explores the ongoing methodology and approach being used to select a limited but crucial set of Process Safety Performance Indicators to enable effective measurement and the appropriate management of process safety performance. © 2009 American Institute of Chemical Engineers Process Saf Prog, 2009     

Volatility estimation from observed option prices

It is well established that the standard Black-Scholes model does a very poor job in matching the prices of vanilla European options. The implied volatility varies by both time to maturity and by the moneyness of the option. One approach to this problem is to use the market option prices to back out a local volatility function that reproduces the market prices. Since option price observations are only available for a limited set of maturities and strike prices, most algorithms require a smoothing technique to implement this approach. In this paper we modify the implementation of Andersen and Brotherton-Ratcliffe to provide another way of dealing with this issue. Numerical examples indicate that our approach is reasonably successful in reproducing the input prices.     

Exchange Rules and the Incentive Compatibility of Choice Experiments

The incentive properties of stated-preference surveys continue to be a central debate in the valuation of public goods. The majority of empirical studies have focused on incentive properties of contingent valuation questions in relation to situations where answers have monetary consequences. This research explores the incentive properties of repeated, attribute-based choice questions when subjects are provided with an explicit connection between choices and outcomes. Two market/provision-rules are investigated: a posted-price market and a plurality-rule vote. These two provision rules are contrasted to treatments in which no provision rule is discussed—subjects are simply asked to choose their preferred alternative. These three hypothetical choice treatments are compared with a binding choice treatment. While none of the public good treatments are theoretically incentive compatible, we include a comparison of hypothetical and binding choices for a private-good that is incentive compatible. The private good experiments indicate that marginal willingness to pay (WTP) estimates from the hypothetical treatment are larger, but not statistically different than corresponding estimates in the binding choice treatment. Results for the public good experiments indicate that marginal WTP estimates from the hypothetical treatments are much larger, and statistically different than corresponding estimates in the binding choice treatment. The bias is largest when no provision rule is discussed. The bias is reduced with the inclusion of a provision rule, but surprisingly, there was no difference across provision rule treatments. Overall, our results indicate that choice experiments involving a public good should include a provision rule to reduce bias, but the resulting marginal WTP estimates may still be more biased, on average, than those arising from contingent valuation survey formats.     

Neglected elements in vertical integration analysis: The case of retail price preticketing

The “conventional wisdom” with respect to the advantages to be gained through vertical integration are highly overrated. That associated with increased efficiency tops the list. Also, those advocating vertical integration have tended to ignore the preticketing phenomenon. In these cases the best that can be said is that there may exist a neutral effect. On the other hand, empirical analysis shows that, at the worost, negative effects may prevail.     

THE IMPORTANCE OF ASSET INCOME AMONG THE ELDERLY*

This paper focuses on the income patterns among the elderly. The life cycle hypothesis suggests that income and assets will decline after retirement. Data from the 1980 U.S. decennial census confirms that total income declines for succeeding elderly cohorts. The census data, however, shows that income from assets for elderly cohorts increases until the cohort aged 85 years and older. This pattern is similar for different sex-marital groups. Recent research that has addressed the issue of savings among the elderly is summarized and four possible explanations for the increase in income from assets found in the decennial census are discussed. We conclude by suggesting the implications of this data for the life cycle theory and public policy.