Expense preference behavior and management “outsourcing”: a comparison of adopters and non-adopters of contract management in U.S. hospitals

Specialized managerial expertise, coupled with the threat of non-renewal should improve efficiency in firms that opt for contract management arrangements. To examine this we apply a generalized version of tests for expense preference behavior to U.S. hospitals in the 1990s. Extending prior literature, we create a quasi-experimental design for a comparison of adopters and non-adopters of contracts using propensity score methods. We generate the distribution of ‘expense preference’ parameters for all contract adopters in both the pre- and post-adoption states, and for a matched control group of non-adopters over the same period. Our results show that contract adoption leads to reduced expense preference behavior, but that this result depends critically on the input being examined.

Does the internet defy the law of gravity?

We show that gravity holds in the case of digital goods consumed over the Internet that have no trading costs. Therefore trade costs cannot fully account for the effects of distance on trade. In particular, we show that Americans are more likely to visit websites from nearby countries, even controlling for language, income, immigrant stock, etc. Furthermore, we show that this effect only holds for taste-dependent digital products, such as music, games, and pornography. For these, a 1% increase in physical distance reduces website visits by 3.25%. For non-taste-dependent products, such as software, distance has no statistical effect.     

Welfare Consequences of Alternative Insurance Contracts in the Mixed For-Profit/Nonprofit Hospital Market

With the advent of managed competition, contingent insurance contracts are replacing traditional fee-for-service plans that were based on pooling principles. Under contingent contracts, insurance is tied to particular providers, while under pooling contracts, insurance is provided for services rendered by all competing providers. To examine the implications of such contracts in hospital care, we model two competing hospitals, a for-profit and a nonprofit, within the framework of a two-stage game. With various assumptions concerning the objectives of the nonprofit, we are able to explore the welfare implications of different insurance contracts and the overprovision problem.