Understanding Firm, Physician and Consumer Choice Behavior in the Pharmaceutical Industry

This paper argues that the pharmaceutical industry represents an exciting opportunity to carry out academic research. The nature of the industry allows researchers to answer new questions, develop new methodologies for answering these questions as well as to apply existing methodology to new data. The paper opens with some industry background, then provides a brief overview of some important research areas and discusses the open questions in each area. Issues of data type and availability are also discussed. This paper is based on a session (with the same title and participants) that was part of the Sixth Invitational Choice Symposium hosted by the University of Colorado and held at Estes Park, Colorado during June 4–8, 2004.     

Dyads, triads, and the theory of exchange: Between liberty and coercion

Economists commonly use the Edgeworth box to illustrate the ability of exchange to generate gains from trade. In contrast to this framework of dyadic exchange, we explore triadic forms of exchange where margins of coercion are also present. In the presence of triadic exchange, market transactions are no longer wholly voluntary and instead reflect an admixture of liberty and coercion. We illustrate triadic exchange in the context of credit markets, showing how continual turbulence is a sign of neither market failure nor government failure but is rather a systemic quality of triadic exchange as a system of societal governance.     

Ethnic polarization and the duration of civil wars

In this paper we analyze the relationship between ethnic polarization and the duration of civil wars. Several recent papers have argued that the uncertainty about the relative power of the contenders in a war will tend to increase its duration. In these models, uncertainty is directly related to the relative size of the contenders. We argue that the duration of civil wars increases the more polarized a society is. Uncertainty is not necessarily linked to the structure of the population but it could be traced back to the measurement of the size of the different groups in the society. Given a specific level of measurement error or uncertainty, more polarization implies lengthier wars. Our empirical results show that ethnically polarized countries have to endure longer civil wars than ethnically less polarized societies.     

Endogenous Home Bias in Portfolio Diversification and Firms’ Entry

The home bias in portfolios is considered a main puzzle in international macroeconomics. This paper provides a new benchmark for its analysis in a tractable new open economy macroeconomic model, where the home‐biased position is an optimal allocation. An equilibrium model of perfect risk‐sharing is specified, with endogenous portfolios and firm entry. Unlike in previous work, the international portfolio diversification is driven by home bias in capital goods—independently of home bias in consumption when countries are of equal size. The model explains the recent patterns of portfolio allocations in developed economies. Most important, optimal portfolio shares are independent of market dynamics.     

The Impact of Foreign Aid Linked to Infrastructure and Pollution Abatement

This paper studies the macroeconomic effects of foreign aid taking into account environmental quality. We develop a dynamic equilibrium model in which public investments in both infrastructure and pollution abatement can be co‐financed using domestic resources and international aid. We consider untied aid, aid fully tied to either infrastructure or abatement and aid equally tied to both expenditures. We find that when the extent to which agents are affected by environmental problems is taken into account, then, regardless of the chances of substitution between factors, transfers linked to both infrastructure and pollution abatement may be the best welfare‐enhancing alternative.