a proposal to solve the comparability problem in cost utility analysis in cost utility analysis it is assumed that health state valuations are directly comparable across individuals instead health state valuations may be relative and related to people s expectations and abilities then health state valuations are not fully comparable across people and consequently cost utility analysis cannot be applied in full the present paper analyzes this comparability problem and proposes a method to solve it

price inertia and market structure empirical evidence from austrian manufacturing 1993 price inertia and market structure empirical evidence from austrian manufacturing applied economics vol 25 no 9 pp 1175 1186

equity weights in the allocation of health care the rank dependent qaly model this paper introduces the rank dependent quality adjusted life years qaly model a new method to aggregate qalys in economic evaluations of health care the rank dependent qaly model permits the formalization of influential concepts of equity in the allocation of health care such as the fair innings approach and it includes as special cases many of the social welfare functions that have been proposed in the literature an important advantage of the rank dependent qaly model is that it offers a straightforward procedure to estimate equity weights for qalys we characterize the rank dependent qaly model and argue that its central condition has normative appeal

industry structure and the speed of price adjustment recent work has suggested that there is an association between the degree of concentration in an industry and the speed at which prices adjust to changes in prime costs cagan 8 domberger 12 13 scherer 21 p 356 and the references cited therein apart from its intrinsic interest to students of industrial economics there would seem to be three reasons for investigating this association first to see what light if any it throws upon the influence of industrial structure on the price level together with the rate and process of inflation secondly to test the assumption made in some influential studies e g godley and nordhaus 15 coutts godley and nordhaus 10 and haig and wood 18 that the size of the lag between cost and price changes is solely dependent upon the length of the fabrication production and delivery period in the various industries the third reason is a belief held by the author that distributed lag coefficients in econometric studies should be subject to analysis and not left hanging in the air as part of the development of a large scale econornetric model of the australian economy the imp model a team of researchers under the direction of dr brain at melbourne university have estimated price prime cost equations for 43 manufacturing sectors using annual data referring to the period 1948 49 1973 74 1 the estimating equation is of the form

aversion to health inequalities and priority setting in health care traditionally aversion to health inequality is modelled through a concave utility function over health outcomes bleichrodt et al bleichrodt h diecidue e quiggin j 2004 equity weights in the allocation of health care the rank dependent qaly model journal of health economics 23 157 171 have suggested a dual approach based on the introduction of explicit equity weights the purpose of this paper is to analyze how priorities in health care are determined in the framework of these two models it turns out that policy implications are highly sensitive to the choice of the model that will represent aversion to health inequality

eliciting people s preferences for the distribution of health a procedure for a more precise estimation of distributional weights in order to incorporate distributional concerns into cost effectiveness analysis it would be useful to elicit distributional weights that express people s valuation of marginal health gains at various levels of health distributional preferences are commonly elicited either through a person trade off pto or a gain trade off gto technique an inherent problem of the gto is that it is based on the valuation of non marginal health gains in practice many contributions using the pto also focus on non marginal health gains this paper demonstrates that the failure to distinguish appropriately between marginal and non marginal health gains may lead to seriously misleading estimates of distributional weights moreover the paper proposes a methodology for utilising information obtained through non marginal analysis more efficiently in order to obtain more reliable estimates of distributional weights the methodology was successfully applied in an empirical study of age weights

market structure and price adjustment in the u s wholesale gasoline markets abstract the issue of sticky prices in u s wholesale gasoline market is re examined allowing for the effect of market structure due to increased market concentration caused by mergers acquisitions and joint ventures which started in the late 1990s in the u s oil industry i investigate the effects of market structure on the pattern of price adjustment based on the notion that increased market concentration leads to downward price stickiness and asymmetric short run price adjustment in the transmission of crude price changes to wholesale gasoline price i find that market concentration has an insignificant asymmetric effect on the speed of price adjustment but a significant asymmetric effect on short run price adjustments in the response of wholesale gasoline prices to crude price shocks in three u s wholesale markets furthermore the signs on the coefficients of market concentration effects on price dynamics in the models support the assertion that increased market concentration leads to downward price stickiness in only one of the three markets examined overall the results indicate that market structure does not have a strong effect on the dynamics of price adjustment

implications of basing health care resource allocations on cost utility analysis in the presence of externalities abstract cost utility analysis is increasingly being advocated as a tool for helping to establish funding priorities among programs and services in the health care sector as currently conducted however cost utility analysis is problematic as a basis for achieving allocative efficiency because it excludes externalities the exclusion of externalities may bias program ranking in unpredictable ways leading to a non optimal allocation of resources consideration of externalities also raises a number of distributional issues for the evaluation of health services and highlights the importance of developing economic evaluation methods that are consistent with the conceptual basis for allocating resources

production lags and price behaviour this paper explores the implications of the production lag for the firm s decisions the authors establish a significant relationship between price behavior and the length of the production lag they show that specific results in the literature are crucially dependent upon the assumption about the production lag by allowing the production time to exceed the decision period the basic framework of the earlier price inventory models is significantly extended the model thus incorporates finished goods inventories as well as goods in process inventories copyright 1992 by the london school of economics and political science

pressure and the division of a public budget this paper considers the division of a public budget among competing interests the planner determines the optimal allocation by maximizing a weighted social welfare function these weights reflect society s attitudes to different recipient groups and are not constrained to be constant by exerting pressure the recipients can attempt to manipulate the weights and hence influence the division of the budget the amount of resources used on pressure and the effects on the preference weights are calculated an important parameter in the model is the elasticity of pressure for which an appropriate estimate is presented from the case of competition for a share of a health services budget in norway

inventory and price behaviour the point of this paper is that inventory adjustment attenuates downward pressure on price when realized demand is low because firms accumulate inventory hold overs speculating that demand will be stronger in the succeeding period when realized demand is high the firm draws down its inventories until a stock out occurs and price rises to clear the market

a new axiomatic approach to the evaluation of population health in this paper we explore the implications of normative principles for the evaluation of population health we formalize those principles as axioms for social preferences over distributions of health for a given population we single out several focal population health evaluation functions which represent social preferences as a result of combinations of those axioms our results provide new rationale for popular theories in health economics such as the unweighted aggregation of quality adjusted life years qalys or healthy years equivalents hyes and generalizations of the two aimed to capture concerns for distributive justice without resorting to controversial assumptions on individual preferences

measuring attitudes towards inequality individuals attitudes to inequality aversion are measured using survey data based on the leaky bucket experiment for several groups of students in australia and israel three forms of social welfare function are estimated it is found that measures of inequality aversion can be obtained with some precision and that these estimates are substantially lower than the values typically used by those measuring inequality and examining optimal tax structures furthermore a welfare function based on the gini inequality measure is generally found to give a better fit than forms based on constant relative or constant absolute inequality aversion jel classification c91 d63

using repeated choice experiments to evaluate the impact of policy changes on cervical screening australia was one of the first countries to introduce a publicly funded human papilloma virus hpv vaccine program and its introduction coincided with a media campaign to promote regular cervical screening one issue with hpv vaccination is how it impacts on demand for screening this study examines changes in women s screening preferences following these two interventions using a novel approach to policy evaluation based on repeated discrete choice experiments the study extends our previous analysis of attitudes to screening by taking advantage of the timing of the choice experiments to examine the impact of the two policy changes on determinants of screening we find that unexpectedly willingness to screen is generally lower post interventions the reason for this trend appears to be related to hpv vaccination we also find that interventions have minor impacts on how women value screening attributes our approach allows us to examine the impact of provider behaviour a simulation demonstrates tha

a note on the estimation of the equity efficiency trade off for qalys abstract in this note the veil of ignorance approach is tested as a basis for empirically determining the shape of the social welfare function for qalys an experiment is carried out where the participants choose between different societies that differ with respect to per capita qalys and the distribution of qalys the answers are analyzed using logistic regression analysis according to the results the respondents are willing to give up 1 qaly in the group with more qalys to gain 0 45 qalys in the group with fewer qalys but this trade off is independent of the size of the difference in qalys between the groups

the social welfare function and individual responsibility some theoretical issues and empirical evidence the literature on income distribution has attempted to evaluate different degrees of inequality using a social welfare function swf approach however it has largely ignored the source of such inequalities and has thus failed to consider different degrees of inequity the literature on egalitarianism has addressed issues of equity largely in relation to individual responsibility this paper builds upon these two literatures and introduces individual responsibility into the swf results from a small scale study of people s preferences in relation to the distribution of health benefits are presented to illustrate how the parameter values of a swf might be determined

understanding preference for egalitarian policies in health are age and sex determinants this article presents an empirical assessment of the relevance of different factors when understanding preferences for outcome egalitarian policies in health in particular respondent age and sex a representative sample of the spanish population was interviewed n 1209 after being informed that those from the higher social class have longer life expectancy at birth than those from the lower social class respondents were required to choose between two programmes to increase life expectancy of the two groups by the same amount the distribution neutral programme and to target the lowest social class group thereby reducing current health inequalities the targeting or egalitarian programme two variants one with and the other without visual aid are used majority 69 of respondents support targeting an effect of age was observed where younger and older individuals are less likely to target the egalitarian policy than those in middle age however individual s sex was not associated wit

on aggregating qalys a comment on dolan dolan dolan p 1998 the measurement of individual utility and social welfare journal of health economics vol 17 pp 39 52 in a recent paper suggested an empirical method for estimating the shape of the social welfare function using a simple theoretical model it is shown that dolan s proposed empirical method has no theoretical foundation the main problem with the approach is that it measures only the altruistic values that individuals attach to other peoples health status and ignores the utility that individuals attach to their own health status

illustrating adverse selection in health insurance markets with a classroom game this paper describes a classroom game that illustrates the effects of asymmetric information and adverse selection in health insurance markets the first part of this game simulates a market in which buyers can purchase insurance from sellers in some periods government regulation prevents sellers from using information about buyer type to determine premiums the results demonstrate the classic prediction that asymmetric information will result in adverse selection here low risk buyers will forego the purchase of insurance at a measurable loss of potential earnings in the second part of the game sellers and buyers can trade two different types of health insurance policies one moderate and another generous under government mandated community rating and limits on premium increases no buyers will purchase the generous plan questions are provided to stimulate discussion of the causes and consequences of adverse selection for consumers and insurers and possible solutions for employer and government sponsored programs

actively learning about demand and the dynamics of price adjustment by observing the quantity demanded at particular prices a firm may learn about the parameters of its demand curve in such an environment price changes obstruct the learning process by inducing additional noise the authors paper constructs a dynamic model where a price setting firm endogenously controls the speed of learning the model provides a possible explanation for price inertia as a stable pricing policy allows the firm to learn more rapidly which improves future expected profits furthermore even in the long run learning continues to affect the firm s optimal price copyright 1990 by royal economic society

equity and equality in health and health care this paper explores four definitions of equity in health care equality of utilization distribution according to need equality of access and equality of health we argue that the definitions of need in the literature are inadequate and propose a new definition we also argue that irrespective of how need and access are defined the four definitions of equity are in general mutually incompatible in contrast to previous authors we suggest that equality of health should be the dominant principle and that equity in health care should therefore entail distributing care in such a way as to get as close as is feasible to an equal distribution of health

theories of justice and their implications for priority setting in health care abstract the paper aims to show how three theories of distributive justice utilitarianism egalitarianism and maximin can provide a clearer understanding of the normative basis of different priority setting regimes in the health service the paper starts with a brief presentation of the theories followed by their prescriptions for distribution as illustrated with their respective preferred points on a utility possibility frontier after this general discussion attention is shifted from utils to health the paper discusses how the recent norwegian guidelines for priority setting can be understood in the light of the theories

inventories and price inflexibility a firm maximizing expected discounted profits taking account of the actions of its competitors choosing price and output before stochastic demand is known and holding inventories or unfilled orders to accommodate discrepancies between output and demand is shown to respond to a change in demand by changing its output whether the demand change is transitory or permanent but by changing the price it charges only if the demand change is permanent this proposition is shown to be consistent with german data the data are qualitative the empirical analysis uses the multivariate conditional logit model the empirical results are summarized by gamma coefficients

sticky prices inventories and market power in wholesale gasoline markets a model with costly adjustment of production and costly inventories implies that wholesale gasoline prices will respond with a lag to crude oil cost shocks unlike explanations that rely upon menu costs imperfect information or long term buyer seller relationships this model predicts that futures prices for gasoline will adjust incompletely to crude oil price shocks that occur close to the expiration date of the futures contract we test and confirm this implication examining wholesale price responses in 188 gasoline markets we also find that firms with market power adjust prices more slowly than do competitive firms consistent with the model

adverse selection in health insurance markets evidence from state small group health insurance reforms abstract the past decade witnessed major changes in state laws governing the sale of health insurance to small employers states took measures to restrict insurers ability to distinguish between high and low risk customers because of concern about the low rate of coverage among workers in small firms the high prices in the small group market and the absence of federal health reform using both individual level and employer level data i test predictions about the effect of reforms on the employer provided health insurance market i estimate these effects for small firms and their workers using large firms and their workers in the same states as well as large and small firms and their workers in non reform states as comparison groups i find the reforms decreased the rate of employer coverage on average for workers in small firms by less than two percentage points within small firms low expenditure individuals experienced a larger decline in the rate of coverage through their employer while the coverage rate of high expenditure individuals rose slightly in some specifications there is also evidence that comprehensive reforms increased premiums slightly for small employers and that most of this increase was passed on to workers through higher employee contributions

implications of spillover effects within the family for medical cost effectiveness analysis medical cost effectiveness analyses traditionally treat patients as isolated individuals and neglect the effects of improvement in patients health on the welfare of their family members we use a model based on a family utility function with altruistic linkages to show that there can be direct and indirect effects on the welfare of all family members we focus specially on a model of how the spillover effects to the spouse in a two person family might affect choice of treatments for prostate cancer we then test the predictions of this model by analyzing treatment choices of prostate cancer patients using the linked seer medicare database we find that our results are consistent with the model s predictions we conclude that cost effectiveness analyses may better reflect the full costs and benefits of medical interventions if they incorporate these family effects however concerns about equity present a dilemma for the practice of cea from the societal perspective

optimal medical treatment under asymmetric information a model is developed of patient doctor interaction under asymmetric information it examines how both the probability of consulting and initial health status are semi endogenously determined by a potential patient determining a threshold health level below which he demands a consultation it is shown that the demand elasticity with respect to socio economic variables is lower the more severe the illness the paper also offers a model of the supply side a distinction is established between uncertainty and asymmetric information between the patient and the doctor after deriving the conditions for an equilibrium of the patient doctor interaction payment systems for achieving medical adequacy and pareto efficiency are analysed

utilities versus rights to publicly provided goods arguments and evidence from health care rationing grounds of the consequentialist and sometimes approximately utilitarian moral framework on which it is based an alternative methodological approach is suggested and in addition to consequences four normative determinants of health care entitlements are identified rights public opinion social contracts and community values survey evidence is presented which shows support for these alternative frameworks and a rejection of consequentialism the paper suggests that a if not the major challenge facing the designers of rationing guidelines is that of pluralism i e the need to integrate considerations from a set of frameworks

health utility indices and equity considerations the aim of this paper is to propose methods that incorporate equity concerns into cost utility analysis the focus of the paper is on qalys but the results apply to health utility indices in general two interpretations of qalys are considered qalys as von neumann morgenstern utilities and qalys as measures of health a justification is provided for aggregating consistently scaled qalys as utilities over individuals the conditions underlying unweighted aggregation of qalys are identified these conditions exclude two common types of equity concern algorithms are proposed that take into account equity concerns and that are relatively easy to apply

monetary shocks market structure and administered prices this paper examines interindustry variation in the response of prices to nominal aggregate demand disturbances this subject has been the focus of numerous investigations in recent years 7 8 9 10 11 12 13 17 and 28 a long standing motivation for this attention has been debate over gardiner means s 22 administered price ap thesis which in broad terms seems to imply that cyclical price flexibility diminishes with increases in market power more recently researchers have focused on imperfect competition as a source of price stickiness because of the importance of this mechanism for the emerging new keynesian analysis of business cycles 1 3 6 thus far however the empirical studies on this subject have reported mixed results and the relationship between imperfect competition and price flexibility remains unsettled curiously an alternative to the market power explanation of inter industry variation in cyclical price flexibility has been largely ignored in these past studies even though it lies at the heart of the new classical macro models the lucas 21 supply function lsf which is key to the striking policy results of these models predicts that output will respond more to a demand shockand by implication absolute prices will respond less in those industries with a history of greater variation in their relative demand or price industry level investigation of price movements thus provides a partial test of the lsf which like the ap thesis remains open to question this paper presents evidence on the explanatory power of both the ap and the lsf approaches we begin with a price change equation that can be derived from a standard lsf model as shown by robert gordon 15 an important feature of this specification is its distinction between anticipated and unanticipated money growth we then show that this same price equation can be given an ap interpretation relying principally on recent work of rotemberg and saloner 29 both approaches predict variation across industries in their price response to unanticipated money growth but they offer different explanations of the cause the lsf theory suggests dependence on the industry s relative demand instability the ap models suggest dependence on industry structure evidence on the competing theories is developed from annual price data on 328 four digit

inequality aversion health inequalities and health achievement this paper addresses two issues the first is how health inequalities can be measured in such a way as to take into account policymakers attitudes towards inequality the gini coefficient and the related concentration index embody one particular set of value judgements by generalising these indices alternative sets of value judgements can be reflected the other issue addressed is how information on health inequality can be used together with information on the mean of the relevant distribution to obtain an overall measure of health achievement

market structures price cost margins and unionism an empirical note abstract empirical results show the existence of a non linear relationship between concentration and price cost margins a non linear specification provides substantial evidence that unions reduce profits especially in more oligopolistic industries

trade openness and inflation the role of real and nominal price rigidities the paper revisits the long standing question of the impact of trade openness on the inflation output trade off by accounting for the effects of product market competition on price flexibility the study develops a new keynesian open economy dynamic stochastic general equilibrium model with non constant price elasticity of demand and calvo price setting in which the frequency of price adjustment is endogenously determined it demonstrates that trade openness has two opposing effects on the sensitivity of inflation to output fluctuations on the one hand it raises strategic complementarity in firms pricing decisions and the degree of real price rigidities which makes inflation less responsive to changes in real marginal cost on the other hand it strengthens firms incentives to adjust their prices thereby reducing the degree of nominal price rigidities and increasing the sensitivity of inflation to changes in marginal cost the study explains the positive relationship between competition and the frequency of price adjustment observed in the data it also provides new insights into the effects of global economic integration on the phillips curve

axioms for health care resource allocation this paper examines principles of health care resource allocation based on axioms for individual preferences and distributive justice we establish axioms for representing individual preferences by quality adjusted life years qalys as well as axioms for existence of a social welfare function depending only on qalys a symmetric cobb douglas social welfare function is characterized by an axiom stating that social welfare is anonymous with respect to the distribution of individual life years replacing this axiom with an axiom of non age dependence we obtain a characterization of a utilitarian social welfare function with certain weights further we give axioms for a social welfare function being a weighted sum of power transformations of individual qalys

price transmission and local market power empirical evidence from the austrian gasoline market we analyse the impact of local market power on price margins and different dimensions of price adjustment dynamics speed and asymmetry of price transmission using data for a large number of indiv

priority setting in health care and higher order degree change in risk this paper examines how priority setting in health care expenditures is influenced by the presence of uncertainty about the severity of the illness and the effectiveness of medical treatment we provide necessary and sufficient conditions on social preferences under which a social planner will allocate more health care resources to populations at higher risk changes in risk are defined by the concept of stochastic dominance up to order n the shape of the social utility function and an equity weighting function are used to model the inequality aversion of the social planner we show that for higher order risk changes the usual conditions on preferences such as prudence or relative risk aversion are not necessarily required to prioritise health care when there are different levels of uncertainty associated with otherwise similar patient groups

optimal price adjustment under imperfect information abstract variations in cost and demand do not have symmetrical impact on the optimal price of the imperfectly competitive firm this asymmetry is not so important as long as information regarding both cost and demand is sufficient however it becomes crucially important in case of incomplete information usually firms have more complete or harder information on cost than on demand this difference in information status on the cost and on the demand side can explain both cost based pricing and slow price adjustment to demand in an optimizing framework with bayesian learning about changed demand conditions

equity in health the importance of different health streams this paper develops a conceptual framework in which preferences about the distribution of future health gains depend on differences in four health streams these are as follows 1 the amount of health to be gained 2 the no treatment profiles 3 the amount of health experienced thus far and 4 the amount of health gained previously as a result of public health interventions this classification puts the well established concerns for severity stream 2 and age weights stream 3 into a more complete analytical framework stream 4 has not been discussed to date and the paper suggests some moral arguments about the distributive relevance of this stream of health

cost effectiveness utility analyses do current decision rules lead us to where we want to be despite the growing literature on economic evaluation of health care programmes little attention has been paid to the theoretical foundations of cost effectiveness and cost utility analyses and the validity of the decision rules adopted as methods of achieving the stated goals we show that although applications of the techniques can be used to pursue some managerial objectives in the context of highly constrained environments such applications are inconsistent with both welfare economic objectives and the interpretations of the findings of these applications alternative strategies are identified as potential and practical methods for pursuing welfare economic objectives

price setting in the euro area some stylized facts from individual producer price data this paper summarizes the microevidence on the setting of producer prices in the euro area the main findings are i 21 of producer prices are adjusted each month ii producer prices are changed more frequently and by smaller amounts than consumer prices even after controlling for product characteristics iii price decreases are relatively frequent iv inflation correlates positively with the difference between the frequency of price increases and decreases and v there is substantial variation in price flexibility across sectors which can be explained in part by differences in the cost structure the degree of competition and the level of sectoral inflation

determining the parameters in a social welfare function using stated preference data an application to health one way in which economists might determine how best to balance the competing objectives of efficiency and equity is to specify a social welfare function swf this paper looks at how the stated preferences of a sample of the general public can be used to estimate the shape of the swf in the domain of health benefits the results suggest that it is possible to determine the parameters in a social welfare function from stated preference data but show that people are sensitive to what inequalities exist and to the groups across which those inequalities exist

health inequality and non monotonicity of the health related social welfare function in a recent paper in this journal abasolo and tsuchiya abasolo i tsuchiya a 2004 exploring social welfare functions and violation of monotonicity an example from inequalities in health journal of health economics 23 313 329 have strongly argued for the use of a non monotonic health related social welfare function this note discusses both the limitations of the measure proposed by abasolo and tsuchiya abasolo i tsuchiya a 2004 exploring social welfare functions and violation of monotonicity an example from inequalities in health journal of health economics 23 313 329 and the problems associated with their empirics we are able to show how non monotonicity may lead to paradoxical results and policies further we examine the empirics of abasolo and tsuchiya abasolo i tsuchiya a 2004 exploring social welfare functions and violation of monotonicity an example from inequalities in health journal of health economics 23 313 329 and provide an alternative explanation to the observed patterns in the data that do not violate monotonicity finally we briefly mention why the atkinson sen framework may be more appropriate as a way forward

quantity adjustment costs and price stickiness abstract price stickiness is often modelled as the consequence of costly price adjustment mechanisms we derive a similar result from costly quantity adjustment mechanisms an interesting property of the model is that the optimal decision of each producer is more sluggish than the optimal behaviour of the industry as a whole

on the economic foundations of cea ladies and gentlemen take your positions abstract there are still many ongoing debates about several aspects of the methodology of economic evaluations of health care interventions some of the disparities in recommendations on methodological issues may be traced back to different viewpoints on cost effectiveness analysis cea in general two important views are the welfarist approach which aims at embedding cea into traditional welfare economics and the decision maker s approach which takes a broader and more pragmatic view on cea the focus in welfarism may be on utility while that of the decision maker s approach may be considered to be on health in this paper it is examined how these two views differ and how these differences may subsequently lead to debates in methodological areas it is indicated that embedding the practical operationalisation of cea in welfare economics seems impossible in a strict welfarist approach it is necessary to view qalys as being utilities although one may question whether such an approach to qalys is appropriate also equity considerations may play an important role in cost effectiveness analysis and these should preferably be taken into account in a way that reflects societal attitudes towards an equitable distribution of health care these equity considerations may not always be directly related to utility or efficiency furthermore both camps may prefer different methods for cost measurement in areas such as productivity costs and informal care a better recognition of the contents and origins of controversies and disputes may enhance the clarity of discussions

priority setting in health care an axiomatic bargaining approach abstract this paper examines how axiomatic bargaining theory can be used to analyze different rules for dividing the health care budget between two patients this approach allows an explicit statement of the assumptions underlying the division rules and also provides a general characterization of the consequences of using these rules when the opportunity set or number of patients changes jel 118

on the efficiency fairness trade off this paper deals with a basic issue how does one approach the problem of designing the right objective for a given resource allocation problem the notion of what is right can be fairly nebulous we consider two issues that we see as key efficiency and fairness we approach the problem of designing objectives that account for the natural tension between efficiency and fairness in the context of a framework that captures a number of resource allocation problems of interest to managers more precisely we consider a rich family of objectives that have been well studied in the literature for their fairness properties we deal with the problem of selecting the appropriate objective from this family we characterize the trade off achieved between efficiency and fairness as one selects different objectives and develop several concrete managerial prescriptions for the selection problem based on this trade off finally we demonstrate the value of our framework in a case study that considers air traffic management this paper was accepted by yossi aviv operations management

a note on eliciting distributive preferences for health while in theory the strength of preferences for equity in health can be expressed in an inequality aversion parameter in practice analysts would have to obtain them from people s choices we are faced with a number of methodological problems when turning to this type of empirical research this note investigates which types of preference could explain the choices people make when responding to equity efficiency questions of this kind respondents may be heavily influenced by concerns that are not related to their equity preferences something which may lead them to choose distributions that are not consistent with models on the equity efficiency trade off specifically a threshold effect is identified which could explain why some people would rather prefer to concentrate than to diffuse health gains the second aim of this note is to offer some lessons from a survey which was designed for eliciting people s distributive preferences for health gains

aversion to health inequalities in healthcare prioritisation a multicriteria optimisation perspective abstract in this paper we discuss the prioritisation of healthcare projects where there is a concern about health inequalities but the decision maker is reluctant to make explicit quantitative value judgements and the data systems only allow the measurement of health at an aggregate level our analysis begins with a standard welfare economic model of healthcare resource allocation we show how under the assumption that the healthcare projects under consideration have a small impact on individual health the problem can be reformulated as one of finding a particular subset of the class of efficient solutions to an implied multicriteria optimisation problem algorithms for finding such solutions are readily available and we demonstrate our approach through a worked example of treatment for clinical depression

a nonparametric elicitation of the equity efficiency trade off in cost utility analysis we performed an empirical elicitation of the equity efficiency trade off in cost utility analysis using the rank dependent quality adjusted life year qaly model a model that includes as special cases many of the social welfare functions that have been proposed in the literature our elicitation method corrects for utility curvature and therefore our estimated equity weights are not affected by diminishing marginal utility we observed a preference for equality in the allocation of health the data suggest that the elicited equity weights were jointly determined by preferences for equality and by insensitivity to group size a procedure is proposed to correct the equity weights for insensitivity to group size finally we give an illustration how our method can be implemented in health policy

industrial structure concentration and the speed of price adjustment it is argued that the relationship between market structure and the speed of price adjustment involves two distinct forces with opposing directions t he leadership effect and the industry profitability effect the direction of the relationship will depend on the relative importance of these effects estimation of an equation explaining the speed of price adjustment in terms of industrial concentration and the length of the production period provided evidence of negative effects for bo th the above variables copyright 1988 by blackwell publishing ltd

health inequality and non monotonicity of the health related social welfare function a rejoinder this rejoinder demonstrates that the arguments made in at 2006 are not robust and the case against non monotonic hrswf and their empirics remain overwhelming

asymmetric dynamic pricing in a local gasoline retail market asymmetric price adjustment is a common phenomenon in many markets around the world particularly in retail gasoline markets this paper studies the existence of this phenomenon in the retail gasoline market in the city of santiago chile using a data set of weekly gas station prices that covers a period of almost four years we found that prices adjust asymmetrically and the asymmetry is different for branded gas stations and unbranded stations in addition we found that the asymmetry for high margin stations is statistically equivalent to that for low margin stations this evidence is suggestive of collusion as a rationale for the asymmetric pricing policy observed

qalys and the equity efficiency trade off as the volume of research on quality adjusted life years qalys has increased concern has begun to be expressed about the equity aspects of resource allocation decisions based on the results of this research this paper suggests that a common theme running through the criticisms of the qaly approach is a concern about inequality it also suggests that the method for incorporating distributional concerns which is currently being pursued by advocates of the qaly approach will only ever capture concerns other than a concern about inequality the paper suggests a method for incorporating both sets of concerns into resource allocation decisions

classroom games a market for lemons abstract the incentives that arise in markets with asymmetric information are illustrated in the classroom exercise presented here student sellers choose both a quality grade and a price for their products initially both prices and grades for all sellers are posted and buyers select from these offerings in this full information setup the market prices and grades quickly reach efficient levels that maximize total surplus next although sellers continue to choose grades and prices only prices not grades are posted for buyers to see when they shop the grades and prices then fall to inefficiently low levels the observed market outcomes in this exercise can stimulate useful discussion of asymmetric information market failure and remedies such as quality standards and warranties

investigating the social value of health changes this survey has demonstrated that the danish public is concerned with distributional aspects of health gains they have a strong inclination to give priority to those in a more severe health state provided their expected benefits are large enough to bring them to the health level where their rival patients are without treatment results also indicated that the equity argument may not apply with equal force on all health dimensions respondents did to some extent trade off equity for greater health gains a nouvelle finding is that the valuations of health increments per se seem to be affected by whether questions are framed as individual or social choices if social decision making is the issue health gains which involve relieving patients of extreme problems are valued more highly than relief of minor ailments these discrepancies between individual and social valuations suggest that the use of qaly values elicited from an individual s perspective may not be valid in social decision making

inequality aversion in income health and income related health abstract based on a survey of a sample of the general public we estimate inequality aversion across income health and bivariate income health inequality aversion is domain specific mean inequality aversion is greater for income than for health but the underlying distributions of aversion attitudes differ with a highly bi modal distribution of inequality aversion values for health in which nearly half the participants display very low aversion and nearly half display very high aversion aversion to income related health inequality is greater than that to income or health alone consistent with previous literature we find only weak associations between aversion attitudes and individual characteristics the magnitude of the estimates implies potentially large gains in welfare from reducing inequality in these domains

relative prices concentration and money growth comment in a recent article in this review 1983 henry chappell and john addison provide new evidence on the administered pricing thesis that links an industry s price behavior over the business cycle to its structural features most notably some measure s of the monopoly power possessed by firms in that industry the approach taken by chappell and addison c a is both sensible and novel essentially they regress aggregate inflation measures for different groups of manufacturing industries on a distributed lag in monetary growth the industry groups are distinguished by their degree of concentration low medium or high and the validity of the administered pricing thesis is then tested by comparing the time pattern of response in each group to monetary impulses chappell addison conclude that this test reveals no clear response differences between the sectors of varying concentration and hence reject the hypothesis of concentrationrelated administered prices the purpose of this comment is to show that the c a conclusions are overly strong their focus on the mean lag as the sole basis of interindustry comparisons obscures important differences in the pricing performance of the lowand high concentrated sectors more fundamentally the c a test is risspecified in that it fails to differentiate between the expected and unexpected components of money growth as suggested by robert barro 1977 when the analysis allows for these modifications the c a data reveal considerable support for the administered pricing hypothesis 1 the chappell addison model

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

accounting for future costs in medical cost effectiveness analysis most medical cost effectiveness analyses include future costs only for related illnesses but this approach is controversial this paper demonstrates that cost effectiveness analysis is consistent with lifetime utility maximization only if it includes all future medical and non medical expenditures estimates of the magnitude of these future costs suggest that they may substantially alter both the absolute and relative cost effectiveness of medical interventions particularly when an intervention increases length of life more than quality of life in older populations current methods overstate the cost effectiveness of interventions which extend life compared to interventions which improve the quality of life

the measurement of preferences over the distribution of benefits the importance of the reference point this paper uses the atkinson method which was initially developed to measure the shape of the social welfare function swf in the domain of income to measure the shape of the swf with respect to the distribution of health benefits two separate studies were conducted involving a total of 71 respondents a comparison of the results across the two studies suggests that reference point effects play an important role in determining responses thus more research is needed on the role that reference point effects ought to and do play in determining the nature and extent of the efficiency equity trade off before the results of studies of this kind can be interpreted as equity parameters which may simply be plugged into an appropriately specified swf

economic evaluation of health care programmes is cea better than cba it has been noted earlier that during the same period that the contingent valuation cv method evolved and became the most commonly used method of valuing environmental projects the development in health economics was instead been towards cost effectiveness analysis cea recently there has been a growing interest in the use of cea where qalys quality adjusted life years are used as a measure of effectiveness as the method of evaluation for environmental projects the purpose of this paper is to answer the question is cea a superior method to cba both theoretically and empirically to provide information to decision makers for use in decisions on resource allocation in health the paper deals with the following topics the underlying theoretical foundation for cea is cea free of income distribution considerations is qaly a superior measure to wtp the usefulness of incremental ce ratio icer to determine resource allocation the paper concludes that there is neither theoretical nor practical support for the claim about the superiority of cea

exploring social welfare functions and violation of monotonicity an example from inequalities in health the social welfare function swf has been used within the economics literature to study trade offs between equality and efficiency these swfs are characterised by properties determined by traditional welfare economics one of these properties the monotonicity principle is explored in this paper in the context of health there may be occasions when the monotonicity principle is violated as there may be circumstances where distributional issues dominate efficiency concerns when this is the case conventional swfs are not flexible enough to represent such social preferences therefore we propose a swf with an alternative specification which is general enough to accommodate preferences that are not necessarily monotonic a survey of the spanish general public was undertaken to estimate preferences regarding equality in health relative to efficiency in health the results with 973 usable responses give strong support to the existence of public preferences which violate the monotonicity principle and thus to the usefulness of the alternative specification proposed here

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

the measurement of individual utility and social welfare it has been suggested by a number of economists that decisions about how to allocate scarce health care resources should be informed by the cost per quality adjusted life years qalys of the different alternatives one of the criticisms of the qaly approach is that it is based on the measurement of individual utility yet the values elicited are used to inform social choice in this respect it is argued that the qaly approach fails to take account of distributional issues that are known to be important in the context of health care this paper addresses this issue and presents an approach grounded in microeconomic theory that is flexible enough to deal with a wide range of efficiency equity trade offs while making the nature of the trade off transparent in addition it is an approach that is relatively simple to investigate empirically and the results of a preliminary study are presented as illustration of this

the normative economics of health care finance and provision whereas in many countries the crisis in medical care has been seen in terms of excess spending on health services in the uk it has been seen at least by most of those who manage and work in the nhs as a crisis of underfunding this has come about as the result of the government s successful attempts to restrain the rate of growth of real spending on the nhs which in turn reflects the government s belief that its principal effective weapon against what it perceives to be inefficiency in the nhs is to challenge management itself reformed and to some extent liberated by systematic financial squeezes the same concern has given rise to a host of proposals for reform of the nhs most of which involve a much greater role for private insurance private finance of other kinds such as out of pocket payments and private provision of health care itself

measurement of health state utilities for economic appraisal health status measurement for use in economic appraisal of health care programmes is reviewed in this paper with particular emphasis on utility measurement a framework for economic appraisal is presented displaying the various components that must be measured and showing how the three forms of analysis cost effectiveness analysis cost benefit analysis and cost utility analysis relate to the framework and to each other one of the components in the framework is health status it can be measured using ad hoc numeric scales willingness to pay receive or health state utilities the determination of health state utilities is reviewed covering the following issues alternative sources of utilities health state descriptions multi attribute utility approach determination of appropriate subjects utility aggregation and accuracy three measurement techniques for health state utilities are described in detail rating scale standard gamble and time trade off the use of these methods is described for both chronic and temporary health states and for both health states considered better than death and those considered worse than death

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

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

some political economy aspects of macroeconomic linkages with agriculture though the political process leading to the 1985 farm bill has shunned proposals for significant policy change commentators on u s food and agricultural policy continue to characterize the current policy environment as arriving at a turning point where fundamental realignment of policy is possible among the factors indicating a need for change macroeconomic linkages have been singled out as primary sources of increasing difficulty in agricultural policy management implicit in this view is the idea that a heightened importance of macroeconomic factors represents a structural change in long term patterns of development for the sector that has rendered current policies anachronistic to advance such an idea is to ignore the historical record macroeconomic disturbances and their links to the agriculture sector are central in any historical account of the policy developments leading to direct federal government intervention in the agriculture sector for example the organized agricultural interest groups that emerged during the populist protest of the late nineteenth century were motivated in part in response to the monetary restriction associated with the greenback period and the return to fixed exchange rates under the gold standard in 1879 friedman and schwartz continued price deflation into the mid 1890s and real interest rates that are estimated to have averaged 8 5 in the period 1870 89 summers p 212 proved particularly burdensome to debtridden farmers the demands of the various farmer movements thus consisted of easy money or an elastic currency created by government action government funds for farm mortgages and the subtreasury scheme for creation of government paper money with stored crops as collateral the discontent voiced by farmers over the macroeconomic policies of the nineteenth century can be associated with later institutional changes that organized the federal reserve in 1913 and created the federal land banks in 1916 agricultural price support through provision of loans against crops was not achieved until 1933 with the creation of the commodity credit corporation reiter and hughes pp 1415 16 that policy change along with other provisions for federal government intervention included in the agricultural adjustment act followed a farm crisis that had its origins in macroeconomic adjustments after world war i exports of agricultural products had expanded rapidly in the united states to supply the wartime needs of europe rapid inflation accompanied the export expansion and land prices and farm mortgage debt increased this exacerbated farm sector adjustments when production was restored in europe and when world liquidity was restricted as u s lending to europe was curtailed overcapacity in world primary product markets persisted and the combination of raw material overproduction and monetary deflation that occurred has been cited as a factor generating the broader economic collapse of the 1930s kindleberger pp 98 107 unified political activity by farmers was also intense in the aftermath of world war i the congressional farm bloc coalition of republicans and democrats came into existence in 1921 and sponsored legislation e g the capper volstead act of 1922 and the agricultural credit acts of 1923 aimed at improving farm conditions through promotion of cooperatives and expansion of credit however as the relative purchasing power of farmers continued to decline through the 1920s the farm lobby organized around the theme of equality for agriculture and demanded more margaret s andrews is a resident fellow national center for food and agricultural policy resources for the future gordon rausser is a professor department of agricultdral and resource economics university of california berkeley giannini foundation paper no 785

qalys versus hyes what s right and what s wrong a review of the controversy abstract the paper uses an axiomatic approach to the description of individual preferences for health status sequences to resolve the major issues at stake in the recent controversy over qalys versus hyes while the hye accounts for an individual s time preference for health qaly scores based on the time trade off method will generally differ from the number of hyes hyes do not represent preferences for health under risk unless the utility function for reference flows of health is linear collapsing the two step hye assessment procedure into a single step entails a loss of information as regards the utility of a health status sequence although the procedure does represent preferences for health it fails to supply a description in terms of hyes in the case of risk as a remedy a modified hye approach is proposed

pass through of wholesale price to the end user retail price in the norwegian electricity market abstract in this paper we estimate the pass through of wholesale electricity price to the end consumer price with variable price contracts in the norwegian electricity market using weekly data we find substantial asymmetry when retailers pass on the impact of price changes in the wholesale market to the retail prices as price increases are transmitted more quickly than price decreases by examining the cumulative adjustment function of price change we identify that some dominant retailers might be exercising market power in the retail electricity market for an average norwegian household with variable price contract the cost of asymmetric price pass through due to 2 5 ore kwh change in the wholesale price over the complete life of pass through in a year reaches to a high of 2 28 nok this cost sums up to 3 8 million nok for all the norwegian households on variable price contracts for one time price change to deal with this asymmetric price setting behavior end consumers should switch to spot price contracts and make use of smart grid technologies

the integration of claims to health care a programming approach the paper contributes to the use of social choice and welfare theory in health economics by developing and applying the integration of claims framework to health care rationing related to sen s critique of neo classical welfare economics the integration of claims framework recognises three primitive sources of claim consequences deontology and procedures a taxonomy is presented with the aid of which it is shown that social welfare functions reflecting these claims individually or together can be specified some of the resulting social choice rules can be regarded as generalisations of health maximisation and all have normative justifications though the justifications may not be universally acceptable the paper shows how non linear programming can be used to operationalise such choice rules and illustrates their differential impacts on the optimal provision of health care following discussion of relations to the capabilities framework and the context in which rationing occurs the paper concludes that the integration of claims provides a viable framework for modelling health care rationing that is technically rigorous general and tractable as well as being consistent with relevant moral considerations and citizen preferences