Competitive risk sharing contracts with one-sided commitment

This paper analyzes dynamic equilibrium risk sharing contracts between profit-maximizing intermediaries and a large pool of ex ante identical agents that face idiosyncratic income uncertainty that makes them heterogeneous ex post. In any given period, after having observed her income, the agent can walk away from the contract, while the intermediary cannot, i.e. there is one-sided commitment. We consider the extreme scenario that the agents face no costs to walking away, and can sign up with any competing intermediary without any reputational losses. We demonstrate that not only autarky, but also partial and full insurance can obtain, depending on the relative patience of agents and financial intermediaries. Insurance can be provided because in an equilibrium contract an up-front payment effectively locks in the agent with an intermediary. We then show that our contract economy is equivalent to a consumption-savings economy with one-period Arrow securities and a short-sale constraint, similar to Bulow and Rogoff [1989. Sovereign debt: is to forgive to forget? American Economic Review 79, 43-50]. From this equivalence and our characterization of dynamic contracts it immediately follows that without cost of switching financial intermediaries debt contracts are not sustainable, even though a risk allocation superior to autarky can be achieved.     

Has Austria’s Accession to the EU Triggered an Increase in Competition? A Sectoral Markup Study

We estimate the pro-competitive effects of Austrias participation in the Single Market after its European Union (EU) accession in 1995 in terms of firms market power as measured by the Lerner index, using a sample of 46 industries and 7 industry groups, covering the period 1978–2001. In the framework of the markup estimation method suggested by Roeger (1995), we test for both an instantaneous structural break between 1993 and 1998 and also estimate logistic smooth transition models to take up the proposition that the regime shift is likely to have occurred gradually rather than as a big bang. In sum, the results provide no reason for being euphoric: Pronounced markup reductions were only found in three industry groups (mining and quarrying, wholesale and retail trade; financial services and real estate). At the more disaggregate level, the picture is mixed: Both increases and reductions in market power have been found.     

Monopsonistic discrimination, worker turnover, and the gender wage gap

Motivated by models of worker flows, we argue in this paper that monopsonistic discrimination may be a substantial factor behind the overall gender wage gap. Using matched employer–employee data from Norway, we estimate establishment-specific wage premiums separately for men and women, conditioning on fixed individual effects. Regressions of worker turnover on the wage premium identify less wage elastic labour supply facing each establishment of women than that of men. Workforce gender composition is strongly related to employers' wage policies. The results suggest that 70–90% of the gender wage gap for low-educated workers may be attributed to differences in labour market frictions between men and women, while the similar figures for high-educated workers ranges from 20 to 70%.     

Supply Disruptions and Regional Price Effects in a Spatial Oligopoly—An Application to the Global Gas Market

Supply shocks in the global gas market may affect countries differently, as the market is regionally interlinked but not perfectly integrated. Additionally, high supply‐side concentration may expose countries to market power in different ways. To evaluate the strategic position of importing countries with regard to gas supplies, we disentangle the import price into different components and characterize each component as price increasing or price decreasing. Because of the complexity of the interrelations in the global gas market, we use an equilibrium model programmed as a mixed complementarity problem (MCP) and simulate the blockage of liquefied natural gas (LNG) flows through the Strait of Hormuz. This enables us to account for the oligopolistic nature and the asymmetry of the gas supply. We find that Japan faces the most severe price increases, as the Japanese gas demand completely relies on LNG supply. In contrast, European countries such as the UK benefit from good interconnection to the continental pipeline system and domestic price taking production, both of which help to mitigate an increase in physical costs of supply as well as in the exercise of market power.     

Setting prices in mixed logit model designs

We investigate different procedures to set prices in designs for choice-based conjoint analysis using the mixed logit model which captures latent consumer heterogeneity. Besides discrete attributes, we include a linear price term in the deterministic utility function thereby treating price as continuous variable. We consider two different price intervals and several price sets which contain either two or three prices. We compare these alternatives to set prices by simulating choices for different constellations on the basis of the mixed logit model. Furthermore, we generate ten designs simultaneously instead of just one. Using these simulated choices, we estimate the parameters of the mixed logit model in the next step. To reduce the needed sample size and computation time caused by accounting for latent consumer heterogeneity, we apply Halton draws and set a minimum potential design for prior draws. ANOVA with root mean squared error between estimated and true price coefficient values of individual consumers as dependent variable shows that using more extreme prices as interval bounds and one intermediate price positioned to the right of the interval performs best.     

Cost-effectiveness analysis of rivaroxaban for treatment and secondary prevention of venous thromboembolism in the Netherlands

Background: Until recently, standard treatment of venous thromboembolism (VTE) concerned a combination of short-term low-molecular-weight heparin (LMWH) and long-term vitamin-K antagonist (VKA). Risk of bleeding and the requirement for regular anticoagulation monitoring are, however, limiting their use. Rivaroxaban is a novel oral anticoagulant associated with a significantly lower risk of major bleeds (hazard ratio?=?0.54, 95% confidence interval?=?0.37–0.79) compared to LMWH/VKA therapy, and does not require regular anticoagulation monitoring.

Aims: To evaluate the health economic consequences of treating acute VTE patients with rivaroxaban compared to treatment with LMWH/VKA, viewed from the Dutch societal perspective.

Methods: A life-time Markov model was populated with the findings of the EINSTEIN phase III clinical trial to analyze cost-effectiveness of rivaroxaban therapy in treatment and prevention of VTE from a Dutch societal perspective. Primary model outcomes were total and incremental quality-adjusted life years (QALYs), as well as life expectancy and costs.

Results: Over a patient’s lifetime, rivaroxaban was shown to be dominant, with health gains of 0.047 QALYs and cost savings of €304 compared to LMWH/VKA therapy. Dominance was robustly present in all sensitivity analyses. Major drivers of the differences between the two treatment arms were related to anticoagulation monitoring (medical costs, travel costs, and loss of productivity) and the occurrence of major bleeds.

Conclusion: Rivaroxaban treatment of patients with venous thromboembolism results in health gains and cost savings compared to LMWH/VKA therapy. This conclusion holds for the Dutch setting, both for the societal perspective, as well as the healthcare perspective.