On extremes of mixtures of distributions

In this article we study the max domains of attraction of mixtures of distributions belonging to the max domain of attraction of max stable laws.     

An economic analysis of the optimal information security investment in the case of a risk-averse firm

This paper presents an analysis of information security investment from the perspective of a risk-averse decision maker following common economic principles. Using the expected utility theory, we find that for a risk-averse decision maker, the maximum security investment increases with, but never exceeds, the potential loss from a security breach, and there exists a minimum potential loss below which the optimal investment is zero. Our model also shows that the investment in information security does not necessarily increase with increasing level of risk aversion of the decision maker. Relationships between vulnerability and investment effectiveness and two broad classes of security breach probability functions are examined, leading to interesting insights that can be used as guidelines for managers to determine the optimal level of security investment for certain types of security threats faced by risk-averse firms. Future research directions are discussed based on the limitations and possible extensions of this study.     

Moral Hazard,Income Taxation and Prospect Theory*

The standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximise expected utility. However, prospect theory has now been established as an alternative model of individual behaviour, with empirical support. This paper explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory. It is seen that many of the standard results are modified in interesting ways. The first‐order approach for solving the optimisation problem is not valid over the domain of losses, and the marginal tax schedule offers full insurance around the reference consumption level. The implications of non‐welfarist objectives under income uncertainty are also examined.     

The role of managerial learning and interpretation in strategic persistence and reorientation: An empirical exploration

This study uses a managerial learning framework to build and test a model of the decisionmaking process that drives decisions to strategically reorient an organization. The model examines the effects of past performance, managerial interpretations, and top management team characteristics on the likelihood of strategic reorientation in two distinct environmental contexts. The results indicate that poor past performance, environmental awareness, top management team heterogeneity, and CEO turnover increased the likelihood of reorientation. There are some differences in the ways in which these variables affect reorientation across the two environmental contexts. Poor past performance was more strongly associated with reorientation in the stable environment than in the turbulent environment. The tendency to make external attributions for poor performance outcomes decreased the likelihood of reorientation in the turbulent environment, but not in the stable environment.     

Thresholds,informality, and partitions of compliance

This paper aims to establish and explore the links between two threads in the public finance literature. One is the use of tax thresholds to partition taxpayers into those who are liable to pay tax and those who are not. The other is the notion of ‘informality’ as a central challenge for tax design and implementation. Several insights emerge. First, the results make clear that the term ‘informal’ as used in the literature is imprecise and can consequently be very misleading: the models reveal a range of compliant and non-compliant behaviors with very different welfare and revenue implications. Second, the various forms of behavior considered suggest optimal thresholds generally higher than would otherwise be the case, with quite complicated implications for the associated patterns of (non)-compliance. Third, when (as is realistic) firms and individuals face multiple tax and non-tax obligations, the setting of optimal thresholds is considerably more complex.     

Diabetic peripheral neuropathy: resource utilization and burden of illness

Introduction:

Diabetic peripheral neuropathy (DPN) is a debilitating complication of diabetes and accounts for significant morbidity by pre-disposing the foot to ulceration and lower extremity amputation. Using a large US commercial claims database, this study analyzes the drug class usage and co-morbidities associated with DPN as well as estimates the associated economic burden.

Methods:

Patients older than 18 and diagnosed with DPN were followed longitudinally for 2 years pre- and post-diagnosis date. Patients were analyzed for age, gender, hospital visits, ER and doctor’s office visits, pharmacy claims, co-morbidities, and drug classes prescribed pre- and post-DPN diagnosis. The economic impact post-diagnosis of DPN was compared to the patients’ pre-diagnosis resource use.

Results:

In total, 10,982 incident DPN patients were identified, with a median age of 61 years, and an equal gender distribution. Post-DPN diagnosis, there was a 20% increase in the number of patients visiting hospitals and a 46% increase in the number of visits to hospitals. Further, there was a 46% increase in the annual cost per patient associated with visits to the hospitals, emergency room (ER), doctor’s office, and pharmacy claims. As per the analysis presented in this study, increase in the number of visits, cost per visit, and number of patients visiting hospitals, ER and doctor’s offices added up to a 46% increase in aggregated cost associated with Medical Resource Utilization (MRU) owing to DPN, with the highest increase (60%) in costs associated with hospitalization of patients with DPN.

Conclusion:

This study highlights the high economic burden associated with DPN. The results indicate that resource use significantly increases post-diagnosis of DPN, which leads to an increase in costs for payers. A noticeable proportion of patients with DPN had a pain co-diagnosis signifying the need for treatments that can effectively manage painful DPN.     

The relationship between mixed strategies and strategic groups

This paper identifies a theoretical basis for the existence of strategic groups. We represent the competitive marketplace by means of a game-theoretic model and motivate the existence of markets wherein the only Nash solution may be in mixed strategies. Given deterministic behavior on the part of the firms, we interpret this solution in terms of a strategic groups equilibrium. The major implication of this analysis is that strategic groups can exist even if there is no inherent asymmetry (in terms of skills) between firms.     

Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles

We model consumption and dividend growth rates as containing (1) a small long‐run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long‐run growth prospects raise equity prices. The model can justify the equity premium, the risk‐free rate, and the volatility of the market return, risk‐free rate, and the price–dividend ratio. As in the data, dividend yields predict returns and the volatility of returns is time‐varying.     

Strategic groupings as competitive benchmarks for formulating future competitive strategy: A modelling approach

Previous studies on strategic groups have examined issues such as the identification of strategic groups, the relationship between strategic groups structure and industry performance, and the movement of strategic groups over time. In contrast to previous studies, this paper uses the analytical concepts of game theory to explore the question of what strategic groups will exist in the future. These benchmark (future) strategic groups represent long-run strategic positions available within an industry and thus reference points for firms in developing sustainable competitive strategies. The benchmark strategic groups are discussed and comments are offered to illustrate how firms can use the benchmark information to redirect their strategic positions in order to survive and remain competitive in the long run.