Risk processes analyzed as fluid queues

This paper presents the Laplace transform of the time until ruin for a fairly general risk model. The model includes both the classical and most Sparre-Andersen risk models with phase-distributed claim amounts as special cases. It also allows for correlated arrival processes, and claim sizes that depend upon environmental factors such as periods of contagion. The paper exploits the relationship between the surplus process and fluid queues, where a number of recent developments have provided the basis for our analysis.     

Does it matter who pays for bond ratings? Historical evidence

We test whether Standard and Poor's (S&P) assigns higher bond ratings after it switches from investor-pay to issuer-pay fees in 1974. Using Moody's rating for the same bond as a benchmark, we find that when S&P charges investors and Moody's charges issuers, S&P's ratings are lower than Moody's. Once S&P adopts issuer-pay, its ratings increase and no longer differ from Moody's. More importantly, S&P only assigns higher ratings for bonds that are subject to greater conflicts of interest, measured by higher expected rating fees or lower credit quality. These findings suggest that the issuer-pay model leads to higher ratings.     

A Note on the Probability of k Pure Nash Equilibria in Matrix Games

A formula is derived for the probability that a "randomly selected" n-person matrix game has exactly k pure strategy equilibria. It is shown that for all n ≥ 2, this probability converges to e⁻¹/k! as the sizes of the strategy sets of at least two players increase without bound. Thus the number of pure strategy equilibria in large random n-person matrix games is approximately Poisson distributed with mean one. The latter is a known result obtained by a new proof in this note. Journal of Economic Literature Classification Number: C72.     

Physiological Age,Health Costs,and Their Interrelation

We demonstrate the impact of an observable health-related quantity on the evaluation of individual physiological ages by extending the phase-type aging model proposed by Lin and Liu in 2007 Lin, X. S., and X. Liu. 2007. Markov Aging Process and Phase-Type Law of Mortality. North American Actuarial Journal 11: 92–109.[Taylor &; Francis Online] , [Google Scholar]. In their model, an individual of a given calendar age has a determinable distribution of his or her physiological age. In our article, we use observable information to refine this distribution, thereby better connecting physiological age with the health of the individual. We illustrate our model using health cost data, and we investigate the impact of an observed health cost on the distribution of an individual’s physiological age. We also explore the impact on the expected present value of future health costs.     

Marine-tourism development on a small island in Indonesia: blessing or curse?

Indonesia is a popular tourist destination. Tourism creates jobs and generates revenue but can have negative impacts on culture, society and human rights. This study of one island community in Indonesia explores the relationship between the growth of tourism and the impacts on a local community. A quantitative survey, combined with in-depth interviews, examined perceptions of residents to tourism development. Residents perceived that tourism created jobs and improved access to goods and services. However, tourism has reduced social cohesion and decreased adherence to traditional customs. Conflict between the private sector and residents over ownership and access have also caused violence.     

Telephone company ownership of rural cable television companies

In rural communities, cable companies owned by telephone companies supply basic service at a lower price than comparable cable companies not owned by telephone companies. The lower price (approximately $1.20 per month) appears to be due to lower costs and economies of scope rather than to any anti-competitive actions or cross subsidies. In addition, the monthly price of basic service is positively related to the total number of channels contained in basic service and, in particular, to the number of major channels contained in the basic package. The evidence also suggests that customers purchase basic service to gain access to pay channels.