Mean square error tests for restrictions in singular linear models

Weak and strong mean square error tests of restrictions presented in Wallace (1972) are generalized to apply to singular linear models. The singularity necessitates a slight change in the strong m.s.e. criterion and the requirement that the restrictions be estimable, but otherwise the tests are applied in a fashion analogous to the non-singular case. Use of those tests implies that the solution for the linear model parameter vector is contingent on a test result. The risk behavior of these contingent solutions is discussed.     

How to solve the cost crisis in health care

U.S. health care costs currently exceed 17% of GDP and continue to rise. One fundamental reason that providers are unable to reverse the trend is that they don't understand what it costs to deliver patient care or how those costs compare with outcomes. To put it bluntly, few health care providers measure the actual costs for treating a given patient with a given medical condition over a full cycle of care, or compare the costs they incur with the outcomes they achieve. What isn't measured cannot be managed or improved, and this is all too true in health care, where poor costing systems mean that effective and efficient providers go unrewarded, and inefficient ones have little incentive to improve. But all this can be remedied by exploring the concept of value in health care and carefully measuring costs. This article describes a new way to analyze costs that uses patients and their conditions--not organizational units or narrow diagnostic treatment groups--as the fundamental unit of analysis for measuring costs and outcomes. The new approach, called time-driven activity-cased costing, is currently being implemented in pilots at the Head and Neck Center at MD Anderson, the Cleft Lip and Palate Program at Children's Hospital in Boston, and units performing knee replacements at Sch?n Klinik in Germany and Brigham & Women's Hospital in Boston. As providers and payors better understand costs, they will be positioned to achieve a true "bending of the cost curve" from within the system, not in response to top-down mandates. Accurate costing also unlocks a whole cascade of opportunities, such as process improvement, better organization of care, and new reimbursement approaches that will accelerate the pace of innovation and value creation.     

Below-cost legislation: lessons from the Republic of Ireland

This article traces the emergence, evolution and demise of below-cost legislation in the grocery industry in the Republic of Ireland. The article adds to our understanding of the legislation by adopting the view that, by using the net invoice price as its definition of cost, the legislation increased two streams of quasi-rents, first on suppliers' brands and second on retailers' own brands, which acted to depress competitive forces and direct supplier–buyer negotiations to off-invoice discounts. Supplier-generated quasi-rents financed discounts and, when coupled with retailers' higher margins on their own brands, provided little incentive for a return to a price-competitive environment. Two factors undermined this situation: the substitution of discounters' products for suppliers' brands as the discounters share of the market grew and the increase in cross-border shopping. These had the combined effect of reducing the available quasi-rents earned in the Irish market, resulting in the breakdown of the status quo and a return to price competition. Through its impact on negotiations, the legislation also introduced inefficiencies to both retailers' and suppliers' businesses, representing additional waste that could have been more productively used to reduce consumer prices. The article endorses the Government's decision to rescind the order and remove an important constraint on both vertical and horizontal competitions. Lessons from the Republic of Ireland suggest that the competitive response to the removal of below-cost legislation, and reductions in prices, may take time and will depend on economic circumstances and a change in the prevailing norms of organisational behaviour and quasi-rent seeking opportunities.     

Electronics manufacturing in 2020: A national technological university management of technology mini-Delphi

A Delphi study projects a series of critical changes in electronics manufacturing over the coming quarter-century. These changes imply a need for early planning to adapt production processes to altered materials, integrated products, environmentally conscious processes, different applications, and a markedly different workforce.     

Optimal Social Design: Estimating a Social Welfare Function from Questionnaire Data

A social design x evokes a response y from a set of individuals. The value of the design is expressed in terms of a social welfare function which is derived from Arrow’s formulation of social choice. Making certain simplifying assumptions the social welfare function can be expressed in terms of individuals’ ideal designs. A method for estimating the social welfare function from quite limited empirical evidence is developed. The method is applied to an educational case study. There was considerable variation in individuals’ ideal designs. The components of the social welfare were estimated: the welfare ideal, the population sensitivity, the population variation, the deviation from the ideal and the welfare ceiling. Methodological problems are discussed.     

The allocation of a shared resource within an organization

Many resources such as supercomputers, legal advisors, and university classrooms are shared by many members of an organization. When the supply of shared resources is limited, conflict usually results between contending demanders. If these conflicts can be adequately resolved, then value is created for the organization. In this paper we use the methodology of applied mechanism design to examine alternative processes for the resolution of such conflicts for a particular class of scheduling problems. We construct a laboratory environment, within which we evaluate the outcomes of various allocation mechanisms. In particular, we are able to measure efficiency, the value attained by the resulting allocations as a percentage of the maximum possible value. Our choice of environment and parameters is guided by a specific application, the allocation of time on NASA's Deep Space Network, but the results also provide insights relevant to other scheduling and allocation applications. We find (1) experienced user committees using decision support algorithms produce reasonably efficient allocations in lower conflict situations but perform badly when there is a high level of conflict between demanders, (2) there is a mechanism, called the Adaptive User Selection Mechanism (AUSM), which charges users for time and yields high efficiencies in high conflict situations but, because of the prices paid, in which the net surplus available to the users is less than that resulting from the inefficient user committee (a reason why users may not appreciate ‘market solutions’ to organization problems) and (3) there is a modification of AUSM in which tokens, or internal money, replaces real money, which results in highly efficient allocations without extracting any of the users' surplus. Although the distribution of surplus is still an issue, the significant increase in efficiency provides users with a strong incentive to replace inefficient user committees with the more efficient AUSM.