Strategic Firm Behavior Under Average-Revenue-Lagged Regulation

Price caps have been shown to have incentive properties superior to traditional rate of return regulation. Average-revenue-lagged regulation (ARL) is attractive in that steady-state prices are known to be efficient. We show that the ARL scheme can be manipulated by the firm so as to yield the unregulated global profit maximum. While tests exist that can provide the regulator with evidence of this strategic behavior, we also demonstrate that the unregulated global profit maximum will not be attainable if Laspeyres (L) regulation is employed.Jel classification: L43, L51I would like to thank Michael Crew and an anonymous referee for their extremely helpful suggestions.     

Delivering Public Health Care Services: Substitutes,Complements, or Both?

In this article we investigate how the availability of public health care providers increases (complement) or decreases (substitute) the likelihood of having public or private health insurance. The probability of each of three insurance alternatives (uninsured, Medicaid, private insurance) is modeled as a function of the availability of public programs in the respondents'community along with individual characteristics including family income, health status, and family structure. Using population-based estimates, public hospitals are associated with a crowd-out rate of 3.5 percent to 8.6 percent. Federally qualified health centers were associated with a net complementary effect (additional public insurance take-up) of 7.1 percent. (JEL I11 , I18 , I38 )     

Identifying individual differences: An algorithm with application to Phineas Gage

In many research contexts it is useful to group experimental subjects into behavioral “types.” Usually, this is done by pre-specifying a set of candidate decision-making heuristics and assigning each subject to a heuristic in that set. Such approaches might perform poorly when applied to subjects with prefrontal cortex damage, because it can be hard to know what cognitive heuristics such subjects might use. We suggest that the Houser, Keane and McCabe (HKM) robust classification algorithm can be a useful tool in these cases. An important advantage of this classification approach is that it does not require one to specify either the nature or number of subjects' heuristics in advance. Rather, both the number and nature of the heuristics are discerned directly from the data. To illustrate the HKM approach, we draw inferences about heuristics used by subjects in the well-known gambling task [Bechara, A., Damasio, A.R., Damasio, H., Anderson, S., 1994. Insensitivity to future consequences following damage to human prefrontal cortex. Cognition 50, 7–12].     

You say you want a (Rose) Revolution? The effects of Georgia's 2004 market reforms

After Georgia declared its independence from the Soviet Union, it experienced civil war and strife for more than a decade. In late 2003, the peaceful Rose Revolution installed a new government that began a series of radical market‐liberal reforms. However, the effectiveness of these reforms was controversial. We offer a rigorous evaluation of these reforms via the synthetic control method which creates a credible counterfactual. Compared to the synthetic controls, we find that the reforms enacted after the Rose Revolution led to significant improvements in Georgia's social and economic development, albeit with temporary side effects and argue that this case provides some support for the effectiveness of rapid, multidimensional reform.     

Socioeconomic Status,Religion and Health in India: an Examination of Chronic and Communicable Diseases

The literature on socioeconomic status and health suggests that those in higher positions have better health, and those in lower positions have worse health. There is little evidence of an SES gradient in non-industrialized countries, however, and it is uncertain whether the health gradient established in many Western countries would apply in developing countries. In this study, the authors examine patterns in health outcomes by caste and religion in India, a developing country. Results from a nationally representative sample, the Indian Human Development Survey, suggest that while high SES social groups report less communicable disease, they report a higher prevalence of chronic diseases than low SES groups. This study demonstrates the need to examine diseases of affluence among high SES groups in developing countries while also identifying the particular health concerns that are prevalent among low SES groups.     

International deflation risks under alternative macroeconomic policies

We use a version of the Global Projection Model covering the United States, Euro area and Japan to assess options for dealing with the looming risk of international deflation. The zero floor to interest rates constrains monetary policy. Confidence intervals, derived from stochastic simulations, indicate ranges of uncertainty. The results suggest a high probability of a declining price level for a couple of quarters in 2009. Suitable policy adaptations reduce the risk that this might turn into a prolonged, global deflation. These include: a price level path target for monetary policy, which would respond to previous, as well as expected, shortfalls from the desired inflation rate; a more stimulative fiscal policy; and an increase in the long-run target for inflation.     

Does the law of one price hold in China? Testing price convergence using disaggregated data

This study examines to what extent prices diverge across China and how long it takes prices to converge following idiosyncratic shocks. We consider monthly data using disaggregated goods prices from 36 cities in China. Following [Imbs, J., Mumtaz, H., Ravn, M., and Rey, H., 2005. PPP strikes back: aggregation and the real exchange rate. Quarterly Journal of Economics 120, 1–44.], we use two estimation methods: a fixed effect method when considering goods individually and a mean group estimation specification for a panel including all goods simultaneously. The mean group method also accounts for dynamic heterogeneity across goods. Impulse response functions are obtained to calculate half-lives. With both methods, we find half-lives of only a few months or less, supporting the conjecture that convergence rates within a country are faster than rates estimated in an international context. However, the half-life reported here is still shorter than that for other studies using disaggregated intracountry data. Perhaps a lower degree of specialization and market differentiation in developing countries creates a greater potential for price convergence.     

Games Students Play: Incorporating the Prisoner's Dilemma in Teaching Business Ethics

The so-called "Prisoner's Dilemma" is often referred to in business ethics, but probably not well understood. This article has three parts: (1) I claim that models derived from game theory are significant in the field for discussions of prudential ethics and the practical decisions managers make; (2) I discuss using them as a practical pedagogical exercise and some of the lessons generated; (3) more speculatively, I suggest that they are useful in discussions of corporate personhood.