alliances in a unipolar world unipolarity is a novel condition in world politics and its effects on international alliances have yet to receive sustained theoretical attention tracing its impact requires a careful distinction between the purely structural features common to any unipolar system and the unique characteristics of the current unipole the united states or the policies undertaken by particular u s leaders such as george w bush in general the unipole will enjoy greater freedom of action and be less dependent on allied support enabling it to rely more readily on ad hoc coalitions of the willing lesser powers will be concerned about the concentration of power held by the unipole but they will also face larger barriers to concerted action to contain it hard balancing against the unipole will be unlikely unless the unipole begins a major effort to expand but lesser powers will engage in soft balancing to contain the latter s influence medium powers may pursue alliances with others in order to reduce dependence on the unipole but weaker states are likely to ally with the unipole in order to use its power against local security challenges bandwagoning will remain rare even under unipolarity but disputes over burden sharing and alliance leadership will continue weaker states will prefer multilateral arrangements that enhance their own influence while the unipole will prefer bilateral or ad hoc coalitions of the willing that it can more readily dominate

control and enforcement in order to increase supplier inventory in a jit contract abstract prompt response to customer demand has long been a point of major concern in supply chains inventory wars between suppliers and their customers are common owing to cases in which one supply chain party attempts to decrease its stock at the expense of the other party in order to ensure that suppliers meet their commitments to fulfill orders on time customers must formulate incentives or alternatively enforce penalties this paper deals with a customer organization that has a contract with a supplier based on just in time strategy initiating a policy of sanctions the customer becomes the lead player in a stackelberg game and forces the supplier to hold inventory which is made available to the customer in real time using a class of sanctioning functions we show that the customer can force the supplier to hold inventory up to some maximal value rendering actual enforcement of sanctions unnecessary however contrary to expectations escalation of the enforcement level can in fact reduce the capacity of the supplier to replenish on time consequently the customer must sanction meticulously in order to receive his inventory on time having the possibility to devote a few hours each day to sanctioning activity significantly reduces the customer s expected cost in particular numerical examples show that the customer s costs under an enforcement level may be only 2 percent higher than his costs in a situation in which all inventory is necessarily replenished on time

health plan choice using a unique panel dataset of health plan choices and personal characteristics of employees at a single firm this paper provides estimates of price elasticities for health insurance plans in a managed competition setting estimated price elasticities are larger in absolute value than most previous estimates and the magnitude of the price elasticity suggests that there is a place for price competition in this market we also find evidence of transition costs in switching health plans for older and less healthy employees such differential responses to price may contribute to adverse selection in this market

gulliver untied entry deterrence under unipolarity that the anarchic system generates incentives for states to balance each other s power is conventional wisdom in international relations as such the contemporary unipolar system is an anomaly observers explain its existence in several ways including the benevolence of us hegemony and the constraints international institutions impose on the exercise of us power none of them however explain what is perhaps the most puzzling outcome of the soviet collapse the decision of the united states to maintain its level of military spending to explain its choice we extend the seminal argument waltz advanced long ago to a dynamic setting using a simple model we show that the interest of the unipole in deterring a challenge to its power can induce it to continue to invest in guns rather than to shift its resources to the production of butter this strategy can enable the incumbent unipole to pre empt the balancing process that has long been thought to be central to state survival under anarchy

coordination of supply chains by option contracts a cooperative game theory approach manufacturer retailer supply chains commonly adopt a wholesale price mechanism this mechanism however has often led manufacturers and retailers to situations of conflicts of interest for example due to uncertain market demand retailers prefer to order flexibly from manufacturers so as to avoid incurring inventory costs and to be able to respond flexibly to market changes manufacturers on the other hand prefer retailers to place full orders as early as possible so that they can hedge against the risks of over and under production such conflicts between retailers and manufacturers can result in an inefficient supply chain motivated by this problem we take a cooperative game approach in this paper to consider the coordination issue in a manufacturer retailer supply chain using option contracts using the wholesale price mechanism as a benchmark we develop an option contract model our study demonstrates that compared with the benchmark based on the wholesale price mechanism option contracts can coordinate the supply chain and achieve pareto improvement we also discuss scenarios in which option contracts are selected according to individual supply chain members risk preferences and negotiating powers

switching costs price sensitivity and health plan choice we investigate the extent to which sensitivity to health plan premiums differs across individuals according to characteristics related to the cost of switching plans our results indicate substantial variation in price sensitivity related to expected health care costs younger healthier employees are between two and four times more sensitive to price than employees who are older and who have been recently hospitalized or diagnosed with cancer we also find evidence of status quo bias estimated premium elasticities are significantly higher for new hires than for incumbent employees simulations combining our results with actuarial data illustrate the cost implications of risk related differences in price elasticity

stock wars inventory competition in a two echelon supply chain with multiple retailers this paper studies the competitive and cooperative selection of inventory policies in a two echelon supply chain with one supplier andn retailers stochastic demand is monitored continuously retailers incur inventory holding and backorder penalty costs the supplier incurs holding costs for its inventory and backorder penalty costs for backorders at the retailers the latter cost reflects the supplier s desire to maintain adequate availability of its product to consumers previous research finds the supply chain cost minimizing reorder point policies the cooperative solution the competitive solution is a nash equilibrium a set of reorder points such that no firm can deviate from the equilibrium and lower its cost it is shown that nash equilibria exist and a method is presented to find all of them in some settings the cooperative solution is a nash equilibrium competition does not necessarily lead to supply chain inefficiency in other settings competition leads to costs that are substantially higher than optimal usually but not always the competitive supply chain carries too little inventory three cooperation strategies are discussed change incentives change equilibrium and change control a set of contracts is provided that changes the firms incentives so that the optimal policy is a nash equilibrium an equilibrium change can improve performance but does not guarantee optimal performance to change control the firms let the supplier choose all reorder points a key component in vendor managed inventory that change leads to optimal supply chain performance

competition among hospitals we examine competition in the hospital industry in particular the effect of ownership type for profit not for profit government we estimate a structural model of demand and pricing in the hospital industry in california then use the estimates to simulate the effect of a merger california hospitals in 1995 face an average price elasticity of demand of 4 85 not for profit hospitals face less elastic demand and act as if they have lower marginal costs their prices are lower than those of for profits but markups are higher we simulate the effects of the 1997 merger of two hospital chains in san luis obispo county where the merger creates a near monopoly prices rise by up to 53 and the predicted price increase would not be substantially smaller were the chains not for profit

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

chain gangs and passed bucks predicting alliance patterns in multipolarity contemporary balance of power theory has become too parsimonious to yield determinate predictions about state alliance strategies in multipolarity kenneth waltz s theory predicts only that multipolarity predisposes states to either of two opposite errors which this article characterizes as chain ganging and buck passing to predict which of these two policies will prevail it is necessary to complicate waltz s theory by adding a variable from robert jervis s theory of the security dilemma the variable of whether offense or defense is perceived to have the advantage at least under the checkerboard geographical conditions in europe before world wars i and ii perceived offensive advantage bred unconditional alliances whereas perceived defensive advantage bred free riding on the balancing efforts of others

the industrial organization of health care markets the u s health care sector is large and growing health care spending in 2011 amounted to 2 7 trillion and 18 percent of gdp approximately half of health care output is allocated via markets in this paper we analyze the industrial organization literature on health care markets focusing on the impact of competition on price quality and treatment decisions for health care providers and health insurers we conclude with a discussion of research opportunities for industrial organization economists including opportunities created by the u s patient protection and affordable care act

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

the welfare effects of restricted hospital choice in the us medical care market summary managed care health insurers in the usa restrict their enrollees choice of hospitals to within specific networks this paper considers the implications of these restrictions a three step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer the results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans a welfare analysis assuming fixed prices implies that restricting consumers choice of hospitals leads to a loss to society of approximately 1 billion per year across the 43 us markets considered this figure may be outweighed by the price reductions generated by the restriction copyright 2006 john wiley sons ltd

managed care s price bargaining with hospitals research has shown that managed care mc slowed the rate of growth in health care spending in the 1990s primarily via lower unit prices paid however the mechanism of mc s price bargaining has not been well studied this article uses a unique panel dataset with actual hospital prices in massachusetts between 1994 and 2000 to examine the sources of mc s bargaining power i find two significant determinants of price discounts first plans with large memberships are able to extract volume discounts across hospitals second health plans that are more successful at channeling patients can extract greater discounts patient channeling can add to the volume discount that plans negotiate

returns policy new model introduction and consumer welfare abstract this paper investigates how economic outcomes differ for new model introduction between two extreme contracts outright sales contract and returns policy contract with full credit under the outright sales contract we show that the retailer s incentive to introduce a new model can lead to a reduction of consumer welfare when the retailer is moderately risk averse the primary conclusion from this study is that the returns policy contract resolves this conflict between firms and consumers and that the supply chain introduces the new model only when consumer surplus from the new model is higher than that from the old model

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

assessing competition in hospital care markets the importance of accounting for quality differentiation quality differentiation is especially important in the hospital industry where the choices of medicare patients are unaffected by prices unlike previous studies that use geographic market concentration to estimate hospital competitiveness this article emphasizes the importance of quality differentiation in this spatially differentiated market i estimate a random coefficients discrete choice model that predicts patient flow to different hospitals and find that demand responses to both distance and quality are substantial the estimates suggest that patients do not substitute toward alternative hospitals in proportion to current market shares implying that geographic market concentration is an inappropriate measure of hospital competitiveness

hospital competition in hmo networks abstract we develop a framework for analyzing bargaining relationships between hospitals and hmos under selective contracting using a unique dataset on hospitals in the los angeles area from 1990 to 1993 we estimate the determinants of actual negotiated prices paid to hospitals by two major hmos we find that a hospital s bargaining power and thus its price decrease when the hmo can readily turn to alternative networks that exclude the hospital we simulate the effect of hypothetical hospital mergers on bargaining power and find that some hospital mergers even in urban areas with many nearby hospitals can lead to significant price increases

insurer provider networks in the medical care market i use data on the hospital networks offered by managed care health insurers to estimate the expected division of profits between insurers and providers i include a simple profit maximization framework and an additional effect hospitals that can secure demand without contracting with all insurers e g those most attractive to consumers and those that are capacity constrained may demand high prices that some insurers refuse to pay hospital mergers may also affect price bargaining i estimate that all three types of hospitals capture higher markups than other providers these results provide information on the hospital investment incentives generated by bargaining

supply chain performance and consumer surplus under alternative structures of channel dominance abstract supply chain partnerships exhibit varying degrees of power distribution among the agents this has implications for pricing and operational decisions in the channel and eventually influences the end customers to understand how different power schemes affect the supply chain partners performance and consumer surplus we study channel structures with a dominant manufacturer a dominant retailer and no single agent dominance under random and price sensitive demand channel dominance is interpreted in our setting as exerting power to determine the retail and wholesale prices as well as to transfer the inventory risk to the weaker party we analyze all problems in a game theory based framework and characterize the equilibrium retail price wholesale price and order production quantity we show that the manufacturer dominated channel structure leads to the highest production quantity the lowest retail price and the largest expected surplus for an individual buyer on the other hand the entire channel profit and the total consumer surplus are highest when the retailer holds the channel dominance while both the manufacturer and the retailer are better off when they become a power agent individually channel dominance does not always guarantee higher share of channel profits as we show under the manufacturer dominated structure further insights are derived analytically and numerically from comparisons of the manufacturer retailer dominance schemes with the no single agent dominance structure and integrated channel we also study extensions to investigate the effect of demand model and risk sharing and we address industry settings with alternative schemes of holding cost shortage penalty and salvage value

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

the effect of price on switching among health plans a recent policy change by the university of california uc provides a unique natural experiment for investigating the sensitivity of consumers to health plan premiums when the uc moved to a policy of limiting its contribution to the cost of the least expensive plan out of pocket premiums increased for roughly one third of uc employees we examine the extent to which uc employees switched plans in response to this change in premiums our results indicate a strong response individuals facing premium increases of less than 10 were roughly 5 times as likely to switch plans as those whose premiums remained constant