Inter-basin water transfers under uncertainty: Storage capacity and optimal guaranteed deliveries

This paper deals with water transfers between jurisdictions not claiming riparian rights to the same water source, and taking place through straightforward sales. Taking into account the uncertain nature of water surpluses, we investigate, within a partial equilibrium framework, the implications of a third party's provision of storing facilities upon the potential supplier's decision whether, and to what extent, it is worthwhile to guarantee a constant amount of water exports. The analysis suggests that there exists a minimum storage capacity below which the potential supplier will never find it profitable to divert a constant amount of water outside his boundaries; the greater the uncertainty about future surpluses and/or internal costs due to even occasional water shortages resulting from the water export commitment, the higher the required minimum storage capacity will be. Above this minimum, an increase in the capacity would be better for the surplus agent, but in a situation in which water surplus is expected to decrease over time, increases in storage capacity would make him willing to guarantee a smaller amount of water deliveries.This work has been carried out under the auspices of the European Science Foundation's research program Sharing fresh water resources in the Mediterranean region: An economic perspective. Previous versions have been presented at ESF workshops held at the Universities of Haifa, Padova and Crete. Financial support from MURST (funds 40% — 1992) is gratefully acknowledged. We wish to thank Nunzio Cappuccio, Haluk Akdogan, Karl Mäler, Mordechai Shechter, Naomi Zeitouni, and two anonimous referees for helpful comments. The usual disclaimer applies.     

Changing the way the elderly live: Evidence from the home health care market in the United States

I examine how decreases in government coverage of home health care visits to the elderly in the United States have affected their living arrangements. Specifically, I exploit geographic variation in the Medicare Home Health Care reimbursement rate that arose as a result of legislation passed in 1997 and I identify its impact on the living arrangements of older Medicare beneficiaries. I find that less generous reimbursement policies lead to a greater fraction of elderly giving up independent living. Baseline-model estimates suggest that a decline in reimbursement of one visit per user leads to a 0.98% increase in the fraction of elderly Medicare beneficiaries living in shared living arrangements, that is, living with somebody else, rather than alone or with only the spouse. This estimate implies that a decline in reimbursement of 5.1 visits per Medicare beneficiary increases the fraction of elderly that live in shared living arrangements by 1.12 percentage points. Such an increase is consistent with the time-series increase in the fraction of elderly that live in shared living arrangements between 1997 and 2000.     

Analyzing online reviews in hospitality: data-driven opportunities for predicting the sharing of negative emotional content

Hospitality is one of the sectors that are nowadays most heavily characterized by consumers’ tendency to share online reviews on dedicated digital platforms. While most past work has focused on understanding the effect of online reviews and ratings on consumers’ evaluation and purchase decisions, this research tackles the issue of what drives the sharing of certain types of online content. Specifically, we investigate the sharing of user-generated content characterized by negative emotional valence, and study the effect of two factors on the extent to which user-generated content contains negative emotions. One such factor is reviewer's expertise, while the other is hotel quality. Our analysis of 1200 TripAdvisor reviews on Italian hotels located in three major Italian cities confirm our hypothesis that expert reviewers might share reviews containing less intense negative emotional content compared to less expert reviewers especially when the hotel is of high quality. To support our hypothesis, we build on the research on psychological antecedents of word-of-mouth behaviour suggesting that expert consumers are particularly reluctant to share negative word-of-mouth to avoid projecting a negative image of themselves in social contexts, thus possibly damaging their reputation.     

In-work policies in Europe: Killing two birds with one stone?

Generous social assistance has been held responsible for inactivity traps and social exclusion in several European countries, hence the recent trend of promoting employment through in-work transfers. Yet, the relative consensus on the need for ‘making work pay’ policies is muddied by a number of concerns relative to the design of the reforms and the treatment of the family dimension. Relying on EUROMOD, a EU-15 integrated tax-benefit microsimulation software, we simulate two types of in-work benefits. The first one is means-tested on family income, in the fashion of the British Working Family Tax Credit, while the second is a purely individualized policy. Both reforms are built on the same cost basis (after behavioral responses) and simulated in three European countries suspected to experience large poverty traps, namely Finland, France and Germany. The potential labor supply responses to the reforms and the subsequent redistributive impacts are assessed for each country using a structural discrete-choice model. We compare how both reforms achieve poverty reduction and social inclusion (measured as the number of transitions into activity). All three countries present different initial conditions, including existing tax-benefit systems and distribution of incomes and wages. These sources of heterogeneity are exploited together with different labor supply elasticities to explain the cross-country differences in the impact of the reforms.     

Society as a learning system: Discovery,invention, and innovation cycles revisited

The very simple heuristic suggestion that society as a whole and its numerous subsets operate like learning systems, basically governed by Volterra-Lotka equations, has been extremely valuable in organizing a most variegated collection of statistical sets of time series, ranging from the structure of energy markets to the efficiency of machinery and the expansion of empires. In this paper an attempt is made to treat invention and entrepreneurship, generally perceived as the most “free” of human activities but actually subject to iron rules. Invention and innovation during the last 250 years appear in precisely structured waves that lend themselves to robust prediction. The present wave will reach its maximum momentum around 1990. Furthermore, the introduction, maximum market penetrations, and prices of new primary energies show a very strong link to these innovation waves. This stresses once more that economic features may be the expression of deeper “physical” phenomena related to the basic working of society and thus become predictable up to a point through a very abstract and noneconomic analysis.This work has been done in the frame of IIASA's Energy Systems Program and can be considered as an outgrowth of and complement to the research on the evolution of energy systems described in IIASA Research Reports 79-12, 79-13, and 77-22. There it was found that a new primary energy coming into the market must be observed for 10 or 20 years if one is to extract the basic features necessary to predict its long-term market behavior. Specifically, it was concluded that the dates at which new primary energies come into play cannot be predicted. In this paper innovations are considered not one by one but as an abstract set, whose behavior is analyzed. In this frame possible birth dates for new energy sources can be identified, thus enhancing the quality of very long-term forecasting in the energy field. Also, prices appear predictable, at least in their gross features.     

Economic evaluation of nivolumab for the treatment of second-line advanced squamous NSCLC in Canada: a comparison of modeling approaches to estimate and extrapolate survival outcomes

Background Lung cancer is the most common type of cancer in the world and is associated with significant mortality. Nivolumab demonstrated statistically significant improvements in progression-free survival (PFS) and overall survival (OS) for patients with advanced squamous non-small cell lung cancer (NSCLC) who were previously treated. The cost-effectiveness of nivolumab has not been assessed in Canada. A contentious component of projecting long-term cost and outcomes in cancer relates to the modeling approach adopted, with the two most common approaches being partitioned survival (PS) and Markov models. The objectives of this analysis were to estimate the cost-utility of nivolumab and to compare the results using these alternative modeling approaches.

Methods Both PS and Markov models were developed using docetaxel and erlotinib as comparators. A three-health state model was used consisting of progression-free, progressed disease, and death. Disease progression and time to progression were estimated by identifying best-fitting survival curves from the clinical trial data for PFS and OS. Expected costs and health outcomes were calculated by combining health-state occupancy with medical resource use and quality-of-life assigned to each of the three health states. The health outcomes included in the model were survival and quality-adjusted-life-years (QALYs).

Results Nivolumab was found to have the highest expected per-patient cost, but also improved per-patient life years (LYs) and QALYs. Nivolumab cost an additional $151,560 and $140,601 per QALY gained compared to docetaxel and erlotinib, respectively, using a PS model approach. The cost-utility estimates using a Markov model were very similar ($152,229 and $141,838, respectively, per QALY gained).

Conclusions Nivolumab was found to involve a trade-off between improved patient survival and QALYs, and increased cost. It was found that the use of a PS or Markov model produced very similar estimates of expected cost, outcomes, and incremental cost-utility.     

On the role of science in the postindustrial society: “Logos”—the empire builder

The hypothesis that language and DNA represent two stages of the same evolutionary path is briefly evaluated. Volterra equations, so useful in describing the dynamics of competing systems are, in fact, equally efficient in describing social behavior, as shown in numerous examples. The emergence of language first, and science later, interpreted as a metalanguage, are attributed to a “hypercyclization” of basic competing utterances in analogy of hypercyclization of quasi-species of replicating molecules in Manfred Eigen's theory of DNA development and evolution.     

A structural model for early exit of older men in Belgium

In this article, we propose a structural model of the retirement decision for older workers in Belgium. We model the exit paths available through the various available schemes. Our framework allows exploiting all information on possible exit paths and also better identifying preferences and constraints. Results based upon Belgian microsimulation data from 2001 for private sector workers fits rather well-observed behavior. Simulations of hypothetical reforms illustrate the potential effects of changing social security rules.     

Specification tests of asset pricing models using excess returns

In this paper, we discuss the impact of different formulations of asset pricing models on the outcome of specification tests that are performed using excess returns. We point out that the popular way of specifying the stochastic discount factor (SDF) as a linear function of the factors is problematic because (1) the specification test statistic is not invariant to an affine transformation of the factors, and (2) the SDFs of competing models can have very different means. In contrast, an alternative specification that defines the SDF as a linear function of the de-meaned factors is free from these two problems and is more appropriate for model comparison. In addition, we suggest that a modification of the traditional Hansen–Jagannathan distance (HJ-distance) is needed when we use the de-meaned factors. The modified HJ-distance uses the inverse of the covariance matrix (instead of the second moment matrix) of excess returns as the weighting matrix to aggregate pricing errors. Asymptotic distributions of the modified HJ-distance and of the traditional HJ-distance based on the de-meaned SDF under correctly specified and misspecified models are provided. Finally, we propose a simple methodology for computing the standard errors of the estimated SDF parameters that are robust to model misspecification. We show that failure to take model misspecification into account is likely to understate the standard errors of the estimates of the SDF parameters and lead us to erroneously conclude that certain factors are priced.     

Context Effects on Older Consumers’ Cognitive Age: The Role of Hedonic versus Utilitarian Goals

This paper deals with older consumers’ cognitive age (i.e., the age they feel), which is self‐assessed as systematically lower than their chronological age (i.e., their actual age). Such a tendency would lead older consumers to display attitudes and purchasing behaviors, which are not typical of people of their real age. Two studies show that cognitive age is not an immutable construct but varies according to its context of reference, so that the same individual may feel different ages under different circumstances. Results demonstrate that the declared cognitive age is affected by the physical environment, the social references, and the product categories that the consumer is using when self‐assessing it. Furthermore, the tendency of older consumers to feel younger is stronger when these consumers are pursuing in these contexts hedonic rather than utilitarian goals. These findings provide novel inputs for the development of appropriate ways to measure cognitive age and to deal with it when targeting senior consumers and positioning hedonic versus utilitarian goods.