The Effects of Market Concentration and Horizontal Mergers on Hospital Costs and Prices

Antitrust advocates believe that horizontal consolidation in hospital markets can reduce competition and increase prices while merger advocates believe it can benefit consumers by reducing service duplication. This study analyzed the market conditions, operating characteristics, and costs and prices of approximately 3500 short-term general hospitals (including 112 within-market-area mergers) from 1986 to 1994 to investigate the effects of market concentration, hospital mergers, and managed care penetration. The results show: a shift away from non-price competition toward price competition in health care markets; that this shift was fueled by increased market penetration by price-sensitive buyers; that horizontal hospital mergers produced average cost savings of approximately 5%, which were generally passed on to consumers as lower prices; that cost savings were generally greater for mergers of similar-size hospitals, with a higher degree of duplicative services, and with lower pre-merger occupancy rates; and some evidence that post-merger price reductions were smaller in less-competitive markets.     

An entrepreneurial critique of Georgism

This paper develops a critique of the single-tax proposal of Henry George. We present a simple search-theoretic model for the discovery of natural resources and show that a tax on the unimproved value of land is distortionary. We then consider the time inconsistency and regime uncertainty problem created by even incremental Georgist policy. We discuss historical cases of land reform and the subsequent challenge to re-establish a credible commitment to property rights in land and natural resources.     

Making pro formas perform

Regulators are trying to clear up the muddle created by earnings-report adjustments called "pro formas" that companies issue. Constraining such reporting, as the regulators seem bent on doing, isn't the solution. Firms should increase alternative reporting--and fully account for their accounting.     

Networks,Law, and the Paradox of Cooperation

There is a tension between libertarians' optimism about private supply of public goods and skepticism of the viability of voluntary collusion (Cowen 1992, Cowen and Sutter 1999). Playing off this asymmetry, Cowen (1992) advances the novel argument that the free market in defense services favored by anarcho-capitalists is a network industry where collusion is especially feasible. The current article dissolves Cowen's asymmetry, showing that he fails to distinguish between self-enforcing and non-self-enforcing interaction. Case study evidence on network behavior before and after antitrust supports our analysis. Furthermore, libertarians' joint beliefs on public goods and collusion are, contrary to Cowen and Sutter (1999), theoretically defensible.     

An experimental examination of the house money effect in a multi-period setting

There is evidence that risk-taking behavior is influenced by prior monetary gains and losses. When endowed with house money, people become more risk taking. This paper is the first to report a house money effect in a dynamic, financial setting. Using an experimental method, we compare market outcomes across sessions that differ in the level of cash endowment (low and high). Our experimental results provide support for a house money effect. Traders’ bids, price predictions, and market prices are influenced by the amount of money that is provided prior to trading. However, dynamic behavior is difficult to interpret due to conflicting influences. JEL Classification C91 · C92 · D80 The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.     

Potential of woody biomass production for motivating widespread natural resource management under climate change

In this study we assessed the potential of woody biomass (short-rotation Mallee Eucalypts) for renewable energy generation as an economically viable way of motivating widespread natural resource management under climate change in the 11.9 million ha Lower Murray agricultural region in southern Australia. The spatial distribution of productivity of agricultural crops and pasture, and biomass was modelled. Average annual economic returns were calculated under historical mean (baseline) climate and three climate change scenarios. Economically viable areas of biomass production were identified where the profitability of biomass is greater than the profitability of agriculture under each scenario for three factory gate biomass prices. The benefits of biomass production for dryland salinisation, wind erosion, and carbon emissions reduction through biomass-based renewable energy production were also modelled. Depending on climate scenario, at the median price assessed ($40/tonne) biomass production can generate $51.4–$88 M in annual net economic returns, address 41,226–165,577 ha at high risk of dryland salinisation and 228,000–1.4 million ha at high risk of wind erosion, and mitigate 10.4–12 million tonnes of carbon (CO₂^−e) emissions annually. Economically viable areas for biomass production expanded under climatic warming and drying especially in more marginal agricultural land. Under the baseline, the area at high risk of dryland salinisation was more than double that at high risk of wind erosion. However, under climatic warming and drying the relative importance of these two natural resource management objectives switched with the area at high risk of wind erosion becoming much larger. As biomass production can achieve multiple natural resource management objectives, it may provide a land use policy option that is adaptable to changing priorities and economically resilient given climatic uncertainties. For such a significant and enduring land use change policy it is prudent to assess both the economic and environmental potential under climate change.     

Rational speculative bubbles in the gold futures market: An application of dynamic factor analysis

The existence of speculative bubbles in financial markets has been a longstanding issue under debate. Many financial economists believe that, given the assumption of rational expectations and rational behavior of economic agents, an asset should be priced according to its “market fundamentals.” Others argue that self‐fulfilling rumors of market participants can influence asset prices as well. These self‐fulfilling rumors are initiated by events extraneous to markets and are often called bubbles. The rationality of both expectations and behavior often does not imply that the price of an asset be equal to its fundamental value. In other words, there can be rational deviations of the price from this value—rational bubbles. A rational bubble can arise when the actual market price depends positively on its own expected rate of change, as normally occurs in asset markets. Since agents forming rational expectations do not make systematic prediction errors, the positive relationship between price and its expected rate of change implies a similar relationship between price and its actual rate of change. Under such conditions, the arbitrary, self‐fulfilling expectation of price changes may drive actual price changes independently of market fundamentals; we refer to such a situation as a rational price bubble.¹ © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:79–108, 2001     

Debt Schedules of Tax-Exempt Bonds Using NIC

Municipal bonds are a large proportion of the total number of securities offered every year. The volume outstanding is more than that of all federal agency debt. It is important that the issuance procedure be as cost efficient as possible. This research develops a model to minimize the net interest cost of a municipal bond issue. Net interest cost remains a highly popular award criteria. The model incorporates the level and shape of the yield curve, the schedule of revenue to be received, and the segmented nature of the municipal market.     

Beyond Redemption: The Reporting Practices Of Unlisted Property Trusts

The deterioration over recent years of the Australian real property market brought the focus of public attention on to the investment entities which manage holdings of real properties. Concerns grew particularly about the stability and liquidity of unlisted property trusts. Some of the worries related to asset valuations and whether the balance-sheet representations of trusts' real property reflected likely recoverable amounts. These concerns were realised on 23 July 1991 when the Federal Government announced a 12-month freeze on redemptions from all existing unlisted property trusts. The significance of the financial reporting policies of unlisted property trusts is amplified when their size is considered: for the quarter ending 30 June 1991, assets under management in unlisted property trusts which were members of the Investment Funds Association of Australia (IFA) totalled $6.7 billion. This article describes a survey of unlisted property trusts' general-purpose financial reports.