INSOLVENCY AND RISK-TAKING IN THE THRIFT INDUSTRY: IMPLICATIONS FOR THE FUTURE

This paper puts the current problems facing the thrift industry, Federal Home Loan Bank Board, and Federal Savings and Loan Insurance Corporation into historical perspective. It discusses the development of federal deposit insurance and regulation of depository institutions. The paper discusses causes of the recent financial difficulties faced by thrift institutions and the policy responses to those problems. It then examines the effect of the recent 511 thrift failures on the risk-taking behavior of institutions and the Bank Board's policy responses to risk-taking. Finally, the paper suggests possible responses to the large and growing number of insolvent institutions that have an economic incentive to pursue extremely risky portfolio opportunities.     

Vertical restraints and horizontal control

This article considers vertical restraints in a setting in which duopoly retailers each sell more than one manufactured good. Vertical restraints by a dominant manufacturer enable the firm to acquire horizontal control over a competitively supplied retail good. The equilibrium contracts produce symptoms that are consistent with a variety of observed retail practices, including slotting fees paid to retailers by competitive suppliers, loss leadership, and predatory accommodation with below‐cost manufacturer pricing for the dominant brand(s). Applications are developed for supermarket retailing, where the manufacturer of a national brand seeks to control the retail pricing of a supermarket's private label, and for convenience stores, where a gasoline provider seeks to control the retail pricing of an in‐store composite consumption good.     

Entwicklung des Nebeneinanders von Privat- und Sozialversicherung in den Niederlanden

In the Netherlands, a “dual system” with a public and private sector has been established for health insurance. The advantage of this system is that the positive aspects of a good social policy with room for the employer are combined in order to avoid the buroc-racy and rigidity of a purely public system. In spite of the good experiences with this system over the last years, the Public Health Service is changing and innovations must be given a chance. This explains the willingness of the Netherlands to exchange practical experience with other countries and to discuss with other EU members the possibility of a combined orientated development of the Public Health Service system within the EU.     

Decentralizing Allocation and Distribution by Separation with Information Transfers

Governments often divide operations into separate branches that face different constraints and have limited information. Such separation is feasible if each can operate by solving a simple optimization problem using limited information without requiring game-theoretic calculations about others' actions. We specify two structures of one-way information transfers that allow this. For each structure, we present conditions for unified and decentralized decision-making to have identical outcomes. One of them corresponds to using a Samuelson aggregate welfare function that is not always fully efficient. We apply our results to several examples, including public goods and Ramsey pricing.     

Airline alliances—who benefits?

The advent of global airline alliances in the 1980s gave rise to concerns that increased monopoly power of major carriers would lead to large and sustained producer surpluses. These global alliances now enjoy dominant market shares in the industry. This review examines some 15 years of alliance experience and finds no conclusive evidence that alliance membership has yielded monopoly profits to the airlines. Improvements in terms of load factors and general productivity levels have, for the most part, been accompanied by fare reductions of similar magnitude, resulting in only modest gains to the carriers.     

Control rights, debt structure, and the loss of private benefits: the case of the UK insolvency code

We show how the efficiency of reorganization is affected bythe distribution of control rights under the U.K insolvencycode. Control rights raise particular problems when creditorshave different incentives to keep the firm as a going concern.Such differences may arise from the possession of private benefitsby particular creditors which are lost if the debtor firm isliquidated. The incidence of inefficient liquidations is influencedby the size and seniority of creditors' claims. The currentU.K. code is widely thought to give rise to inefficient liquidations.We show, however, that inefficiency depends upon the debt structureand whether the controlling creditor in formal bankruptcy hasprivate benefits.