1,721,360 research outputs found
Correlated Risks: A Conflict of Interest Between Insurers and Consumers and Its Resolution
Full text linkThis contribution starts out by noting a conflict of interest between consumers and insurers. Consumers face positive correlation in their assets (health, wealth, wisdom, i.e. skills), causing them to demand a great deal of insurance coverage. Insurers on the other hand eschew positively correlated risks. It can be shown that insurance contributes to a reduction of their asset volatility only if unexpected deviations of payments from expected value correlate negatively across lines of insurance. Analyzing deviations from trend in aggregate insurance payments, one finds the following for the United States and Switzerland. Private U.S. but not Swiss insurance has a hedging effect for consumers, while both social insurance schemes expose consumers to excess asset volatility. In the insurance systems of both countries, the private component fails to offset deviations in the social component (and vice versa). As to the supply of insurance, cointegration analysis indicates the absence of common trends. Therefore, insurance companies could offer combined policies to the benefit of consumers, hedging their underwriting risks both domestically and internationally.Insurance, Portfolio Theory, International Diversification, Combined Contracts
Efficient Electricity Portfolios for Switzerland and the United States
Full text linkThis study applies financial portfolio theory to determine efficient electricity-generating technology mixes for Switzerland and the United States. Expected returns are given by the (negative of the) rate of increase of power generation cost. Volatility of returns relates to the standard deviation of the cost increase associated with the portfolio, which contains Nuclear, Run of river, Storage hydro and Solar in the case of Switzerland, and Coal, Nuclear, Gas, Oil, and Wind in the case of the United States. Since shocks in generation costs are found to be correlated, the seemingly unrelated regression estimation (SURE) method is applied for filtering out the systematic component of the covariance matrix of the cost changes. Results suggest that at observed generation costs in 2003, the maximum expected return (MER) portfolio for Switzerland would call for a shift towards Nuclear and Solar, and therefore away from Run of river and Storage hydro. By way of contrast, the minimum variance (MV) portfolio mainly contains Nuclear power and Storage hydro. The 2003 MER portfolio for the United States contains Coal generated electricity and Wind, while the MV alternative combines Coal, Nuclear, Oil and Wind. Interestingly, Gas does not play any role in the determination of efficient electricity portfolios in the United States.energy, electricity, portfolio theory, efficiency frontier, seemingly unrelated regression estimations (SURE)
The Purpose and Limits of Social Health Insurance
Full text linkThis contribution seeks to answer two related questions. First, what is the purpose of social health insurance? Or put in slightly different terms, what are the reasons for social (or public) health insurance to exist, even to dominate private health insurance in most developed countries? And second, what are the limits of social health insurance? Can one say that there is "too much" social health insurance in the following two senses: Should the balance be shifted towards the private alternative? And is the degree of coverage excessive?social health insurance, private health insurance, insurance coverage
Validity of Discrete-Choice Experiments - Evidence for Health Risk Reduction
Full text linkThere is growing interest in discrete-choice experiments (DCE) as a method to elicit consumers' preferences in the health care sector. Increasingly this method is used to determine willingness-to-pay (WTP) for health-related goods. However, its external validity in the health care domain has not been investigated until today. This paper examines the external validity of DCE concerning the reduction of a health risk. Convergent validity is examined by comparing the value of a statistical life with other preference elicitation techniques, such as revealed preference. Criterion validity is shown by comparing WTP values derived from stated choices in the experiment with those derived from actual choices made by the same individuals. Both tests provide strong evidence in favor of external validity of the DCE method.Choice Experiments (DCE), Willingness-to-Pay (WTP), Validity, Risk Reduction, Hip Protectors
The Impact of Aging on Future Healthcare Expenditure
Full text linkThe impact of aging on healthcare expenditure (HCE) has been at the center of a prolonged debate. This paper purports to shed light on several issues. First, it presents new evidence on the relative importance of the two components of HCE that have been distinguished by Zweifel, Felder and Meier (1999), viz. the cost of morbidity and the cost of mortality (their "red herring" hypothesis claims that neglecting the mortality component results in excessive estimates of future growth of HCE). Second, it takes account of recent evidence suggesting that HCE does increase life expectancy, implying that time-to-death is an endogenous determinant of HCE. Third, it investigates the contribution of population aging to the future growth of HCE. For the case of Switzerland, it finds this contribution to be relatively small regardless of whether or not the cost of dying is accounted for, thus qualifying the "red herring" hypothesis.Health econometrics, Aging, Cost of dying, Healthcare expenditure
Spurious correlation in estimation of the health production function: A note
Full text linkIn this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be linearly related to these two factors. Therefore, the estimates reported by Lichtenberg (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States.Health; Life expectancy, Innovation, Pharmaceuticals, Health care expenditure, Cointegration
How Much Internalization of Nuclear Risk Through Liability Insurance?
Full text linkAn important source of conflict surrounding nuclear energy is that with a very small probability, a large-scale nuclear accident may occur. One way to internalize the financial risks associated with such an accident is through mandatory liability insurance. This paper presents estimates of the willingness to pay for increased financial security provided by an extension of coverage, based on the `stated choice' approach. A Swiss citizen with median characteristics may be willing to pay 0.08 cents per kwh to increase coverage beyond the current CHF 0.7 bn. (US 2.7 bn.). An extension of nuclear liability insurance coverage therefore may be effciency-enhancing.risk, nuclear energy, liability insurance, internalization
Between Agora and Shopping Mall
Full text linkAdvertisements provide consumers with knowledge about private products, whereas political information is required to provide voters with knowledge of public issues. Modern information technologies and globalisation are increasing the exposure of individuals to information. Goods advertising is competing with political information for people's attention. This paper presents a politico-economic equilibrium model in which the tension between private and public agendas can be analysed. It is shown that in an information-rich society, international goods market integration tends to reduce the quality of public policy. Complementing economic integration with political integration can increase the gains from globalisation, though not in all cases.Globalisation, agenda-setting, information-rich societies, scarcity of attention, advertising
Is there a U-shaped Relation between Competition and Investment?
Full text linkWe argue that, in a simple setting, the relation between the intensity of competition and cost-reducing investment is U-shaped. We consider a two-stage game with cost-reducing investments followed by a linear differentiated Cournot duopoly. We first show that, except for firms that are much less efficient than the competitor, investment in the subgame-perfect equilibrium is minimal for intermediate levels of competition, which is inversely parameterized by the extent of product differentiation. An extensive set of laboratory experiments also provides support for the U-shape, both for symmetric firms and for leaders. Also consistent with predictions, the relation is negative for firms that are lagging behind.Investment, intensity of competition, experiment
A welfare analysis of "junk" information and spam filters
Full text linkThis paper analyses the equilibrium effects of individual information filters. Information is modelled as advertisements which are distributed across a population of consumers with heterogeneous preferences. An advertisement that provides knowledge about a product with little or no utility for a consumer is considered junk. Filters are characterised by their level of tolerance. The quality of the filter is measured in terms of the share of useful items in the total set of items passing the filter. It is shown that in conditions of decentralised competition, multiple equilibria arise. A social optimum can be achieved by demanding each consumer to reject a certain percentage of advertisements, leaving the choice of what is rejected up to the consumer him/herself.global information society, advertising, junk information, spam filter, Internet regulation
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