Invariance of conditional maximum utility

The consumer benefit in a discrete choice model is often measured by maximum utility. We characterize the conditional (on the chosen alternative) and the unconditional distribution of maximum utility. We show that among a wide class of distributions (independent with convex supports) of error terms, the Type I extreme-value distribution is the unique distribution which ensures that all the conditional distributions of maximum utility coincide. Moreover, we show that for i.i.d. (with convex support) error terms, the invariance of conditional expected maximum utility characterizes the multinomial logit model.     

“Understanding Relationships Using Copulas,” by Edward Frees and Emiliano Valdez,January 1998

Presenteeism occurs when employees are present at the workplace but cannot perform at their best because of ill-health or other reasons, while absenteeism occurs when employees are absent from the workplace. Although absenteeism is important, researchers now say presenteeism can be more costly to businesses and may be responsible for as much as three times the health-related lost productivity as compared to absenteeism and may cost the U.S. economy as much as $150 billion per year. Given the cost of absenteeism and presenteeism, one of the objectives of this article is to provide actuaries with the techniques and insights needed to design disability insurance policies that take into account the dynamics of absenteeism and presenteeism. To this end we develop a simple multistate sickness-disability model of the evolution of an employee’s health over time. We assume employees receive sick pay, the size of which depends on their health state, and there is a government-sponsored unemployment insurance program. In our model it is possible for employees in good health to avoid work by staying home, which is called shirking. To reduce shirking, the employer decides to check the health status of a certain percentage of employees who “call in sick.” Given the sick-pay structure, the probability of a health check, and the existence of unemployment insurance, employees develop rational strategies about whether to engage in shirking, absenteeism, or presenteeism. These strategies are captured in a set of Volterra integral equations. We use these Volterra integral equations to show how the employer can design a disability insurance plan that can incentivise employees to eliminate shirking and to act in a manner that will maximize the employer’s expected profits.     

Examining emotions linked to live chat services: The role of e-service quality and impact on word of mouth

The purpose of this article is twofold: (1) to investigate the emotions experienced by banking customers when using live chat services and their impact on positive word-of-mouth intentions; and, (2) to identify which dimensions of e-service quality (accessibility, customer service and support, perceived security/privacy and design) impact these emotions. A survey was conducted with 682 members of a Web-based panel. Findings demonstrate that emotions, both positive and negative, significantly impact word of mouth. Results further reveal that customer service and support followed by design of live chat services mostly influence consumer emotions. On a practical level, the recommendations provided will improve consumer experience and encourage consumers to use live chat services. This is all the more important since such services are now part of the promotion and contribution of a sustainable mode of consumption that is accessible to all.