insurer hospital bargaining negotiated discounts in post deregulation connecticut this paper uses unique data from the state of connecticut to examine discounting patterns in the state s hospital industry for the years following deregulation 1995 1998 the data provide a rare opportunity to study payer level differences in negotiated discounts for hospital services in addition to presenting descriptive evidence on how discounts vary across payers payer types and hospital types this study uses matched revenue data to analyze the economic determinants of discount magnitudes payer size appears to affect bargaining power but the economic significance of the effect is small the data exhibit patterns consistent with a bargaining explanation in which discount magnitudes depend critically on payers abilities to channel patients to hospitals with which favorable discounts have been negotiated

the wealth effects of deregulation of canadian financial institutions abstract canada like other industrial countries recently introduced various financial reforms to remove the barriers separating the operations and ownership of banks from non bank financial institutions this study analyzes the wealth effects of the reforms on the banks and non bank financial institutions and the changes in their systematic risk resulting from financial deregulation over the period 1984 to 1991 the results indicate that while there was a significant cumulative gain for the insurance industry unlike a number of u s studies there was no evidence of wealth transfer among the institutions during the period of deregulation of the canadian financial system additional tests indicate that although the regulatory changes did not have a significant effect on the risk of the banks the systematic risk of the non bank financial institutions increased significantly during the period of regulatory reforms

the welfare effects of third degree price discrimination in the author examines third degree price discrimination by an upstream monopolist in an intermediate good market discrimination is motivated by the fact that downstream firms differ in their abilities to integrate backward into supply of the input the author shows that under reasonable specifications of equilibrium price discrimination leads to all buyers facing higher input prices in other cases discrimination raises some prices and lowers others the author derives conditions under which discrimination lowers welfare by reducing total output and shows that in some markets discrimination will raise welfare by preventing socially inefficient backward integration copyright 1987 by american economic association

non insurance markets loss size manipulation and competition experimental evidence the common view that buyer power of insurers may effectively counteract provider market power critically rests on the idea that consumers and insurers have a joint interest in extracting price concessions however in markets where the buyer is an insurer the interests of insurers and consumers to reduce prices may be importantly misaligned the positive dependence between loss size and the insurer s expected profits limits the insurer s incentives to reign in loss sizes in markets with small initial loss sizes insurers may try to raise these in order to create demand for insurance after having defined insurance and non insurance markets based on the initial loss size we develop theory to show that insurers with buyer power have incentives to create insurance markets insurer competition will push their profits to zero but markets do not return to the initial non insurance state this constitutes a welfare loss we design experimental insurance markets to test our theory and find support monopolistic insurer subjects in non insurance markets increase loss sizes to establish insurance markets insurer competition eliminates profits but not the loss size to uninsured consumers this provides an additional reason to be careful in granting insurers buyer power jel classification c92 d81 g22 i11 l13

is the glass steagall act justified a study of the u s experience with universal banking before the glass steagall act of 1933 removed commercial banks from the securities underwriting business we evaluate the argument for the separation of commercial and investment banking that conflicts of interest induce commercial banks to fool the public into investing in securities which turn out to be of low quality a comparison of the performance of securities underwritten by commercial and investment banks prior to the act shows no evidence of this instead the public appears to have rationally accounted for the possibility of conflicts of interest and this appears to have constrained the banks to underwrite high quality securities jel g21 g24 n22

bond underwriting by banks and conflicts of interest evidence from japan during the pre war period abstract article 65 of the securities and exchange law of japan which was carried into effect in 1948 prohibited banks from underwriting corporate securities partially because of the concern that combining the banking and securities businesses might result in a potential conflict of interest this paper studies the pricing and long term default performance of industrial bonds underwritten by commercial banks the industrial bank of japan ibj and trust firms as compared to those underwritten by investment houses during the pre war period in japan when banks were allowed to underwrite industrial bonds the evidence rejects the concern about the conflicts of interest

the impact of contingent liability on commercial bank risk taking abstract from 1863 1935 regulators imposed contingent liability on bank shareholders to discourage risk taking using data from 1900 to 1915 i find that banks subject to stricter liability rules have lower equity and asset volatility hold a lower proportion of risky assets and are less likely to increase their investment in risky assets when their net worth declines consistent with the hypothesis that stricter liability discourages commercial bank risk taking these findings provide lessons for current bank regulatory policy and show that the shape of the residual claimant s payoff function has a significant impact on managerial incentives and firm performance

welfare gains from financial liberalization financial liberalization has been a controversial issue as empirical evidence for growth enhancing effects is mixed here we find sizable welfare gains from liberalization cost to repression though the gain in economic growth is ambiguous we take the view that financial liberalization is a government policy that alters the path of financial deepening while financial deepening is endogenously chosen by agents given a policy and occurs in transition towards a distant steady state this history dependent view necessitates the use of simulation analysis based on a growth model our application is a specific episode thailand from 1976 to 1996

bank underwriting of debt securities modern evidence this article examines debt securities underwritten by section 20 subsidiaries of bank holding companies relative to those underwritten by investment houses consistent with a net certification effects for banks bank underwriting of lower credit rated firms to whom the bank lends results in relatively higher prices lower yields we find no evidence of conflicts of interest even when an issue is used to repay bank debt further banks bring a relatively larger proportion of small issues to the market contrary to the contention that universal banking stunts availability of finance to small firms bank underwritings appear to benefit small firms article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

how general are risk preferences choices under uncertainty in different domains we analyze the extent to which individuals choices over five employer provided insurance coverage decisions and one 401 k investment decision exhibit systematic patterns as would be implied by a general utility component of risk preferences we provide evidence consistent with an important domain general component that operates across all insurance choices we find a considerably weaker relationship between one s insurance decisions and 401 k asset allocation although this relationship appears larger for more financially sophisticated individuals estimates from a stylized coverage choice model suggest that up to thirty percent of our sample makes choices that may be consistent across all six domains

analysing the technical efficiency of the spanish football league first division with a random frontier model this article analyses technical efficiency of football clubs in the spanish football league division 1 primera liga from the seasons 1995 1996 to 2004 2005 with an unbalanced panel data the random frontier model is used allowing the identification of random variables in the cost frontier it is concluded that the price of capital investment the number of points won and attendance are heterogeneous variables therefore no common public policy aiming to improve efficiency can embrace all of the clubs so that policies by clusters are required

heterogeneity in risky choice behaviour in a broad population we analyse risk preferences using an experiment with real incentives in a representative sample of 1 422 dutch respondents our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics utility curvature loss aversion preferences towards the timing of uncertainty resolution and the propensity to choose randomly rather than on the basis of preferences we find that all four parameters contribute to explaining choice behaviour the structural parameters are significantly associated with socio economic variables but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data

conflict of interest in commercial bank security underwritings canadian evidence abstract the recent repeal of the glass steagall act in the us has cleared the way for commercial banks to enter the securities underwriting business many of the concerns that resulted in the original passage of the glass steagall act however still exist one of these is the possible conflict of interest a universal bank faces this paper provides evidence on this issue from the experience of canada following its removal of restrictions on chartered bank ownership of investment dealers both ex ante bond yield comparisons between commercial and investment bank underwritten issues and equity price reactions to bond issue announcements provide no evidence of a conflict of interest

are risk aversion and impatience related to cognitive ability is the way that people make risky choices or tradeoffs over time related to cognitive ability this paper investigates whether there is a link between cognitive ability risk aversion and impatience using a representative sample of the population and incentive compatible measures we conduct choice experiments measuring risk aversion and impatience over an annual time horizon for a randomly drawn sample of roughly 1 000 german adults subjects also take part in two different tests of cognitive ability which correspond to sub modules of one of the most widely used iq tests interviews are conducted in subjects own homes we find that lower cognitive ability is associated with greater risk aversion and more pronounced impatience these relationships are significant and robust to controlling for personal characteristics educational attainment income and measures of credit constraints we perform a series of additional robustness checks which help rule out other possible confounds

the efficiency of mozambique soccer league the mocambola abstractthis paper analyses the technical efficiency of the mozambique football league from 2008 to 2014 using a bayesian stochastic frontier model with exponential specification covariates include contextual characteristics such as location identification as a muslim club and sporting performance the results uncover that mozambique sports clubs display varying efficiency revealing distinct managerial incentives in the mozambique football league policy implications are derived including efficiency scores deemed to be acceptable to the league and reconsideration of the rationale for national investment in all league s clubs

a bayesian stochastic frontier of italian football this study analyses the technical efficiency of serie a italian football clubs during the 2004 2012 seasons with a bayesian stochastic frontier model using unique data extracted from clubs annual reports specifically the focus of the study is on assessing the impact effects on clubs efficiency whether they are big clubs they employ several foreign player they compete in european competitions and their involvement with football scandals in the italian football the empirical results reveal that efficiency varies among the clubs analysed and policy implications are derived

cost efficiency of french rugby clubs this article analyses the cost efficiency of french first league rugby clubs using a stochastic frontier model the frontier estimation confirmed that the model fits the data well with all coefficients correctly signed and in line with the theoretical requirements the results show that one of the clubs is operating efficiently with the majority of clubs clustered around 20 inefficiency policy implications are derived

risk aversion and expected utility theory a calibration theorem within the expected utility framework the only explanation for risk aversion is that the utility function for wealth is concave a person has lower marginal utility for additional wealth when she is wealthy than when she is poor this paper provides a theorem showing that expected utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes within expected utility theory for any concave utility function even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes illustrative calibrations are provided

measuring strategic uncertainty in coordination games this paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents analogous to measuring risk attitudes in lotteries we apply this method by conducting experiments on a class of one shot coordination games with strategic complementarities and choices between simple lotteries and sure payoff alternatives both framed in a similar way despite the multiplicity of equilibria in the coordination games aggregate behaviour is fairly predictable the pure or mixed nash equilibria cannot describe subjects behaviour we present two global games with private information about monetary payoffs and about risk aversion while previous literature treats the parameters of a global game as given we estimate them and show that both models describe observed behaviour well the global game selection for vanishing noise of private signals offers a good recommendation for actual players given the observed distribution of actions we also deduce subjective beliefs and compare them with objective probabilities

buyers strategies entry barriers and competition in markets where sellers have customer specific investments and buyers can make credible but costly commitments to switch suppliers buyers strategies attenuate the market power of sellers furthermore since current prices and a buyer s decision to switch suppliers are related limit pricing becomes an equilibrium limit prices increase with the time it takes a buyer to switch suppliers and with buyers switching costs but fall with the level of sunk investments thus sunk investments may restrain the sellers ability to exert market power the paper questions then the standard inverse relationship between market performance and sunk investments

the influence of the economic approaches to regulation on banking regulations a short history of banking regulations this article highlights the theoretical foundations of the regulations at work in the banking sector and examines their responsibility in the onset of the 2007 2008 financial crisis drawing a parallel between the main changes in banking regulations since the 1960s and the evolutions in the economic analyses of regulation over the same period it shows that the shift from the public interest theory of regulation that prevailed until the late 1960s towards the private interest theory of regulation accounts for the substitution of micro prudential regulations for macro prudential ones and explains a paradigmatic change in the conception of the regulatory instruments of the banking authorities it also shows that although the outcome of several factors the 2007 2008 crisis was also a consequence of the fact that the economic analysis of banking regulations supported micro prudential regulations that fail to take the global features and impact of banking activities into account and have proved unable to recommend effective solutions in a context of crisis

banking finance and the role of the state this paper provides an overview of the issue it considers the existing structure of financial regulation the deficiencies that were encountered during the financial crisis and the proposed reforms it discusses whether these are likely to be adequate and argues that there are fundamental failures in product markets capital markets and government relations with financial institutions highlighted in the articles in this issue that question whether current reforms will prove sufficient in particular the article argues that a clearly defined partnership between the state and the banking system needs to be established by which the state protects certain core components of the banking system that perform key functions in an economic system and well specified rules are put in place to avoid renegotiation and lobbying copyright 2011 oxford university press

did j p morgan s men add liquidity corporate investment cash flow and financial structure at the turn of the twentieth century this article presents evidence suggesting that the relationship that existed between the partnership of j p morgan and its client firms partially resolved the latter s external financing problems by diminishing the principal agent and asymmetric information problems i estimate and compare investment regression equations for a sample of morgan affiliated companies and a control group of nonaffiliated companies the econometric results seem to indicate that companies not affiliated to the house of morgan were liquidity constrained

the long term default performance of bank underwritten security issues abstract the glass steagall act of 1933 barred commercial banks and their affiliates from underwriting and dealing in securities activities amidst concerns that banks abused the trust of their depositors and clientele by systematically underwriting poor quality security issues this paper examines if these concerns were justified by studying the long term default performance of bank underwritten issues as compared to non bank underwritten issues the evidence shows that contrary to conventional wisdom bank underwritten issues defaulted less than non bank underwritten issues over a seven year period from the issue date and had a significantly lower mortality rate

performance evaluation of the english premier football league with data envelopment analysis this paper uses data envelopment analysis dea to evaluate the performance of english premier league football clubs from 1998 99 to 2002 03 combining sport and financial variables the paper evaluates how close the clubs are relative to the frontier of best practices analysing how they manage sport as well as financial results managerial implications of the research are devised

are risk preferences stable across contexts evidence from insurance data using a unique dataset we test whether households deductible choices in auto and home insurance reflect stable risk preferences our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household coverage specific poisson processes we find that the hypothesis of stable risk preferences is rejected by the data our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices our results are robust to several alternative modeling assumptions jel d11 d83

financial constraints on sport organizations cost efficiency the impact of financial fair play on italian soccer clubs we analyze the effect of the introduction of stricter financial constraints on the trade off between sporting and economic results we apply a stochastic cobb douglas production frontier model to a

how do health insurer market concentration and bargaining power with hospitals affect health insurance premiums the us health insurance industry is highly concentrated and health insurance premiums are high and rising rapidly policymakers have focused on the possible link between the two leading to aca provisions to increase insurer competition however while market power may enable insurers to include higher profit margins in their premiums it may also result in stronger bargaining leverage with hospitals to negotiate lower payment rates to partially offset these higher premiums we empirically examine the relationship between employer sponsored fully insured health insurance premiums and the level of concentration in local insurer and hospital markets using the nationally representative 2006 2011 kff hret employer health benefits survey we exploit a unique feature of employer sponsored insurance in which self insured employers purchase only administrative services from managed care organizations to disentangle these different effects on insurer concentration by constructing one concentration measure representing fully insured plans transactions with employers and the other concentration measure representing insurers bargaining with hospitals as expected we find that premiums are indeed higher for plans sold in markets with higher levels of concentration relevant to insurer transactions with employers lower for plans in markets with higher levels of insurer concentration relevant to insurer bargaining with hospitals and higher for plans in markets with higher levels of hospital market concentration

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

the underwriting experience of commercial bank affiliates prior to the glass steagall act a reexamination of evidence for passage of the act abstract we examine a major rationale for the passage of the glass steagall act separating commercial and investment banking activities in the u s that these banks abused their superior knowledge by misrepresenting the quality of inferior security issues or passing off bad commercial loans through publicly offered security issues this issue is of current interest even in today s more relaxed environment in the u s and in the universal banking system in europe since there are still lingering doubts that such abuses will not recur in a systematic study of the performance of bond issues underwritten by different classes of underwriters prior to the passage of the glass steagall act we find bank affiliate issue default rates were lower ex ante yields were lower ex post prices were higher and the relative ability of ex ante yields to predict ex post performance no different than investment bank issues the results hold for all categories of bond issues domestic corporate foreign corporate and foreign governments we have also isolated the performance of the bonds underwrit national city company and chase securities corporation which were targets of the pecora hearing these two bank affiliates were found to issue bonds of lesser quality than the other bank affiliates but no worse than those of the investment banks

insurance markets with loss prevention activity profits market structure and consumer welfare this article considers the joint production of insurance protection and loss prevention by insurers we first examine the loss distribution of consumers that is potentially the most profitable for insurers unlike in the preponderance of the insurance literature which assumes cost based pricing of insurance policies we allow the insurer to charge whatever price the market will bear we then examine the expected profit maximizing strategy of assumes cost based pricing of insurance policies we allow the insurer to charge whatever price the market will bear we then examine the expected profit maximizing strategy of the insurer in several different market settings whether the insurance protection and loss prevention services can be perfectly bundled plays a key roll in the insurer s pricing decision we consider consumer welfare under various market settings and demonstrate that a consumer may be better off when the insurance market is monopolistic rather than competitive finally we consider whether monopoly power in the loss prevention market leads to monopoly power in an otherwise perfectly contestable insurance market we also show conditions under which a loss prevention monopolist would increase expected profit by integrating into the insurance market

risk preferences are not time preferences risk and time are intertwined the present is known while the future is inherently risky this is problematic when studying time prefer ences since uncontrolled risk can generate apparently present biased behavior we systematically manipulate risk in an intertemporal choice experiment discounted expected utility performs well with risk but when certainty is added common ratio predictions fail sharply the data cannot be explained by prospect theory hyperbolic discounting or preferences for resolution of uncertainty but seem consistent with a direct preference for certainty the data suggest strongly a difference between risk and time preferences jel c91 d81 d91 understanding individual decision making under risk and over time are two foundations of economic analysis 1 in both areas there has been research to suggest that standard models of expected utility eu and exponential discounting are flawed or incomplete regarding time experimental research has uncovered evidence of a present bias or hyperbolic discounting frederick loewenstein and o donoghue 2002 regarding risk there are number of well documented departures from eu such as the allais 1953 common consequence and common ratio paradoxes an organizing principle behind expected utility violations is that they seem to arise as so called boundary effects where certainty and uncertainty are combined camerer 1992 harless and camerer 1994 and starmer 2000 indicate that violations of expected utility are notably less prevalent when all choices are uncertain this observation is especially interesting when considering decisions about risk taking over time in particular certainty and uncertainty are combined in intertemporal decisions the present is known and certain while the future is inherently risky this observation is problematic if one intends to study time preference in isolation from

interest group competition and the organization of congress theory and evidence from financial services political action committees we develop a positive theory of how interest group competition shapes the organization of congress and use it to explain campaign contribution patterns in financial services since interest groups cannot enforce fee for service contracts with legislators legislators have an incentive to create specialized standing committees which foster repeated dealing between interests and committee members the resulting reputational equilibrium supports high contributions and high legislative effort for the interests contribution patterns by competing interests in the congressional battle over whether banks can enter new businesses support the theory which also has implications for term limits and campaign reform

measuring risk attitudes in a natural experiment data from the television game show lingo we use data from a television game show involving elementary lotteries as a natural experiment to measure risk attitudes unique features of our data set are the substantial monetary stakes and the large sample size crra and cara utility specifications perform approximately equally well we find robust evidence of substantial risk aversion extensions of the basic model which allow for a separate utility flow purely from playing the game or for decisions based on decision weights instead of actual probabilities raise the estimated degree of risk aversion

banks non traditional activities under regulatory changes impact on risk performance and capital adequacy using the big six canadian chartered banks quarterly financial statements and daily stock market data from 1982 to 2018 we examine the impact of non interest income on canadian banks risk perfor