The Distributions of Policy Reserves Considering the Policy-Year Structures of Surrender Rates and Expense Ratios

In this article, we examine how the policy-year structures of expense ratios and surrender rates affect the distributions of policy reserves. Our results show that a convex expense ratio curve, though reduces the mean and the uncertainty of reserves, could make the beneficial impact of surrenders on insurers become detrimental. Our results also show that the convexity of the surrender rate curve is favorable to insurers while the volatilities of surrender rates are unfavorable. We further find that neglecting the policy-year structures of surrender rates and expense ratios may result in overestimation of the mean and the uncertainty of reserves.     

Product development strategies for established market pioneers,early followers,and late entrants

At the time of entry, market pioneers are known for emphasizing major product development projects. After being in the market for many years, however, do market pioneers, early followers, and late entrants maintain different product development strategies? Data from 2273 established manufacturing businesses reveal that market pioneers have the highest probability of engaging in product development, which covers product R&D spending as well as new product sales. Even so, market pioneers and early followers tend to emphasize minor projects, such as product improvements and line extensions. Late entrants are less likely to engage in product development, but those that do tend to emphasize major development efforts. Copyright © 2002 John Wiley & Sons, Ltd.     

A more flexible joint latent model for longitudinal and survival time data

In this article, a more flexible and easily explained joint latent model with time-varying coefficients is used to characterize time-dependent responses and a failure time. The dependence within time-dependent responses and between time-dependent responses and a failure time, and the heterogeneity in both processes are established through partially non-parametric latent variables. Based on longitudinal and survival time data, an estimation procedure is proposed for the parameter functions of the joint latent model. In our estimation, the approximated likelihood is constructed via substituting the basis function expansions for parameter functions. The expectation and maximization (EM) algorithm is then implemented to obtain the maximizer of the approximated likelihood function, and, hence, the estimated parameter functions. The validity of the considered joint latent model enables us to derive the asymptotic properties of the estimated functions. Moreover, the corresponding finite sample properties and the usefulness of our methods are demonstrated through a Monte Carlo simulation and the AIDS Clinical Trials Group (ACTG) 175 data. A possible extension of our joint latent model and some additional topics of interest are also discussed herein.     

Uniqueness of equilibrium for smooth multistage concave games

Smooth, noncooperative, multistage, concave games are formulated so that a new uniqueness condition—based on the Poincaré-Hopf theorem—can be applied. The new condition is the weakest to appear in the uniqueness literature. The uniqueness subgame perfect equilibrium is obtained and examples are given.     

Exploratory analyses of dividend reinvestment plans and some comparisons

In this paper, we explore salient features of dividend reinvestment plans (DRIPs), analyze their financial peculiarities and search for the differences between firms that offer DRIPs and those that do not. As more than 1200 firms currently offer the plan, an understanding of why these plans differ in a variety of cost/benefit structures and, perhaps more importantly, what separates these firms from No-DRIP firms is crucial for both investors and adaptors of the plan. Our research suggests that—out of 17 financial and accounting variables—DRIP firms differ from No-DRIP firms in only three variables. In spite of this, we conclude that there is much to learn about the motivation for DRIPs.     

How accountability pressure on failing schools affects student achievement

Although an emerging body of evidence has shown that the threat of sanctions on low-performing schools can raise student test scores in the short run, the extent to which these test score improvements are due to schools' manipulation of the accountability system has remained uncertain. In this paper, I provide two new strands of evidence to evaluate the relative importance of educational reforms and gaming behavior in generating test score gains by threatened schools. First, using a regression discontinuity design that exploits Florida's system of imposing sanction threats on the basis of a cutoff level of performance, I estimate medium-run effects on student test scores from having attended a threatened elementary school. Threat-induced math improvements from elementary school largely persist at least through the first 1 to 2 years of middle school, while evidence for persistence of reading improvements is less consistent. Second, I analyze the effects of sanction threats on various features of educational production, and I find that sanction threats raise school spending on instructional technology, curricular development, and teacher training. Both strands of evidence are consistent with a predominant role for educational reforms in generating test score gains by threatened schools.     

Asymmetric Information,Bargaining, and Comparative Advantage in Trade Relationships: An Interactive Game

The concept of comparative advantage is a fundamental tool in economics. Yet, it is a concept that new students of economics frequently find challenging to grasp. In this interactive classroom game, I highlight the three essential lessons of comparative advantage: (i) individuals can have a comparative advantage (and thus benefit from specialization) in an activity despite not having an absolute advantage, (ii) the gains from specialization are greatest when individuals have the most heterogeneous skill sets, and (iii) the extent of each individual's share of the gains from specialization is often left to negotiation, with asymmetric information playing an influential role. This classroom game allows each player to possess a unique production function, thus better resembling the diverse pool of potential trade partners that characterizes real life.     

Systematic risk and the theory of the firm: A reexamination

A recent microeconomic model of the determinants of equity betas (Subrahmanyam and Thomadakis 1980) is generalized by including risky human capital in the market portfolio and allowing a general covariance structure between the model's sources of uncertainty. This provides an explanation of the ambiguous effect of operating leverage on beta by viewing human capital and equity contributors as risk sharers in the firm's output risk. This explanation may help to clarify the apparent conflict with the previous literature. The relationship between systematic risk and monopoly power is rederived and shown to depend upon a plausible condition on the correlation between wage rate and price uncertainty. Finally, the public policy implications of this analysis are presented.