Foreign influence and welfare

How do foreign interests influence policy? How are trade policies and the viability of trade agreements affected? What are the welfare implications of such foreign influence? In this paper we develop a model of foreign influence and apply it to the study of optimal tariffs. In a two-country voting model of electoral competition, we allow the incumbent party in each country to take costly actions that probabilistically affect the electoral outcome in the other country. We show that policies end up maximizing a weighted sum of domestic and foreign welfare. Using this formulation we show that foreign influence increases aggregate world welfare when there are no other means of alleviating the externalities that arise from cross-border effects of policies. In contrast, when countries can engage in international agreements, foreign influence can prove harmful as powerful countries may refuse to offer concessions. We also show that power imbalances are particularly detrimental to cooperation when they are positively correlated with economic size.     

Corporate Social Responsibility and Psychosocial Risk Management in Europe

Corporate social responsibility (CSR) is a comprehensive concept that aims at the promotion of responsible business practices closely linked to the strategy of enterprises. Although there is no single accepted definition of CSR, it remains an inspiring, challenging and strategic development that is becoming an increasingly important priority for companies of all sizes and types, particularly in Europe. Promotion of well-being at work is an essential component of CSR; however, the link between CSR, working conditions and work organisation is still found to be unfamiliar to stakeholders. As CSR is strategic and is regarded by many companies and corporate leaders as an important development, it offers opportunities for psychosocial risk management, an area that is currently among the top priorities in working environment and well-being at work debates. However, the link between CSR and psychosocial risk management has not been addressed clearly before. This paper aims to explore the potential role of CSR in promoting well-being at work through the development of a framework for the management of psychosocial risks. As part of the research, key stakeholders [including the World Health Organization (WHO), the International Labour Organization (ILO), the European Agency for Safety and Health at Work (EU-OSHA), the European Commission (EC), employers’ associations, trade unions and other policy experts] across Europe participated in a survey, interviews and focus groups to assess and clarify the link between CSR and psychosocial risk management. On the basis of the findings, a CSR-inspired approach to the management of psychosocial issues at work is proposed. Such an approach can be a useful tool in contexts where, up until now, expertise and tradition in dealing with psychosocial issues have been lacking.     

Common inventory modeling assumptions that fall short: Arborescent networks, Poisson demand, and single-echelon approximations

Traditional multi-echelon inventory theory focuses on arborescent supply chains that use a central warehouse which replenishes remote warehouses. The remote warehouses serve customers in their respective regions. Common assumptions in the academic literature include use of the Poisson demand process and instantaneous unit-by-unit replenishment. In the practitioner literature, single-echelon approximations are advised for setting safety stock to deal with lead time, demand, and supply variations in these settings. Using data from a U.S. supplier of home improvement products, we find that neither the assumptions from the academic literature nor the approximations from the practitioner literature necessarily work well in practice.In a variation of the strictly arborescent supply chain, the central warehouse at our real company not only replenishes other warehouses but also meets demand from customers in the region near the central warehouse. In this paper, we study this dual-role central warehouse structure, which we believe is common in practice. Using high and low volume product demand data from this company, we use Monte Carlo simulations to study the impact of (1) the use of a dual-role centralized warehouse, (2) common demand assumptions made in multi-echelon research, and (3) single-echelon approximations for managing a multi-echelon supply chain. We explore each of these under both centralized and decentralized control logic. We find that the common assumptions of theoretical models impede their usefulness and that heuristics that ignore the actual supply chain structure fail to account for additional opportunities to utilize safety stock more effectively. Researchers should be aware of the gap between standard assumptions in traditional literature and actual practice, and critically evaluate their assumptions to find a reasonable balance between tractability and relevance.     

An analysis of bundle pricing in horizontal and vertical markets: The case of the U.S. cottonseed market

The U.S. cottonseed market has seen the rapid development and adoption of seeds with differing bundles of genetically modified (GM) traits. It has also seen an increase in vertical integration by biotechnology firms. In this article, we investigate the price impacts associated with structural changes in the U.S. cottonseed market from 2002 to 2007. We develop a structural model to examine the substitution/complementarity relationships among cottonseeds sold with different genetic trait bundles and under different vertical arrangements. We examine the price impacts emanating from product differentiation, market concentration, and market size. The econometric investigation finds evidence of subadditive bundle pricing in patented biotech traits. While higher own‐market concentrations are found to be associated with higher prices, we also uncover evidence of cross‐product complementarity effects that lead to lower prices. Simulations are used to evaluate net price effects, illustrating the usefulness of the approach in the analysis of changing market structures.     

Incorporating emotion into social exchange: considering distinct resident groups’ attitudes towards ethnic neighborhood tourism in Osaka,Japan

While numerous studies have utilized SET to examine the residents’ attitudes towards tourism, relatively scant from the literature is a discussion regarding the influence of emotion generated through SET among residents on their attitudes towards tourism. In addition, past studies mainly explored the social exchange between visitors and locals, while neglecting the social exchange within a local community. The goal of this study is to examine the influence individuals’ emotions toward their ethnic counterparts within a community can have on residents’ (i.e., members of the dominant ethnic group—Japanese and members of the ethnic minority group—Koreans) attitudes toward ethnic neighborhood tourism within the Korean neighborhood of Ikuno, Osaka, Japan. Ikuno has the highest concentration of Korean residents in Japan, and the town has become a destination of cultural tourism centered on Korean culture. Analysis of 640 completed questionnaires revealed while attitudes of Korean residents, who are more likely to perceive economic benefits from tourism have more favorable attitudes towards tourism, Japanese residents form their particular attitudes towards tourism based on the emotional solidarity they experience with their Korean neighbors. These findings indicate both utility of economic approach of social exchange theory and significant role of emotion in social exchange.     

Are Important Innovations Rewarded? Evidence from Pharmaceutical Markets

This paper focuses on the relationship between therapeutic value and different measures of market rewards: the number of patents, price, market share, and revenues. Using an assessment of therapeutic value that is provided by the French Haute Authorité de Santé (HAS), I find a weak relationship between most measures of rewards and this assessment of therapeutic value, which suggests that the returns to developing a “me-too” product are not very different from developing treatments with greater therapeutic effects. One interpretation is that the HAS score is a poor assessment of therapeutic value, in which case the use of similar health technology assessments by governments and other payers should be re-examined. Alternatively, if the HAS score is informative, the results suggest that countries are overspending on less innovative products, and that a re-balancing of innovation incentives may be worth considering if therapeutic value is highly related to social welfare.     

The Single Market in Pharmaceuticals

Review of Industrial Organization - This paper examines the state of the single market in the European Union (EU) for pharmaceuticals. As with other products, the EU has adopted a number of...