sharing the proceeds from a hierarchical venture we consider the problem of distributing the proceeds generated from a joint venture in which the participating agents are hierarchically organized we introduce and characterize a family of allocation rules where revenue bubbles up in the hierarchy the family is flexible enough to accommodate a no transfer rule where no revenue bubbles up and a full transfer rule where all the revenues bubble up to the top of the hierarchy intermediate rules within the family are reminiscent of popular incentive mechanisms for social mobilization our benchmark model refers to the case of linear hierarchies but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships

international environmental agreements for river sharing problems we study partial coalition formation and the strategic timing of membership of an iea for environmental issues in the coalitional bargaining game cbg of gomes econometrica 73 1329 1350 2005 we apply the cbg to a specific river sharing problem with two symmetric upstream agents each at a tributary and one downstream agent located at the junction of tributaries we identify five regions in the parameter space of a discount factor and a productivity parameter for water in one region the grand coalition always forms immediately in two other regions immediate formation of the grand coalition and gradual coalition formation both occur with positive probability in another two regions only gradual coalition formation occurs in one of these latter regions a region with discount factors close to one both upstream agents form a monopoly with positive probability formation of the monopoly persists in the limit as the discount factor goes to one

a simple and efficient method for estimating the magnitude and precision of welfare changes in this article we propose a simple and efficient method of estimating welfare measures in an n equation system we also estimate the variance of these measures the accuracy and convergence properties of our approach are studied the algorithm converges quadratically this is a distinct improvement over the vartia algorithm which converges linearly we demonstrate the method by evaluating the welfare consequences of price changes in the provision of health care the gauss code which is very short is included

gender and the demand for medical care the consumption of a set of diverse medical services is analysed in an effort to determine the sources of high utilization by women unlike previous studies of gender and the demand for medical services the range of services investigate allows us to draw conclusions about the influence of physicians as agents we use a modified version of the almost ideal demand model in the emperical analysis which unlike the double log quadratic or linear demand models is consistent with constraints imposed by economic theory through decomposition of the variance it was found that if women reported the same series of health indicators as men their use of most services would fall below that of men

direct displacement effects of labour market programmes using a panel of 250 swedish municipalities over the period 1987 1996 we examine the direct displacement effects of active labour market programmes almps compared to earlier studies on this topic we have more and better data based on our gmm estimations we find that there are direct displacement effects from subsidised employment in the order of approximately 65 but that there seem to be no significant displacement effects from training this result seems to be robust to several alternative specifications

a flexible specification of adjustment costs in dynamic factor demand models this paper proposes a flexible form of adjustment cost function an empirical illustration shows that the flexible form can detect both convex and non convex adjustment costs furthermore the flex

loss allocation in energy transmission networks abstract in this paper we study a cost allocation problem that is inherent to most energy networks the allocation of losses in particular we study how to allocate gas losses between haulers in gas transmission networks we discuss four allocation rules two of them have already been in place in real networks and two others that are defined for the first time in this paper we then present a comparative analysis of the different rules by studying their behavior with respect to a set of principles set forth by the european union this analysis also includes axiomatic characterizations of two of the rules finally as an illustration we apply them to the spanish gas transmission network

identification of supplier induced demand in the health care sector this paper explores the issues and pitfalls encountered when attempting to test empirically the hypothesis that physician hospital or any other input supply level induces increasing demand for health services in the strict sense of demand shift and through that increased demand for the input in question evidence is presented which suggests that an empirical test of the supplier induced demand sid hypothesis of the type traditionally performed may not in fact be feasible with cross sectional aggregate data such as is usually used

municipal labor demand in the presence of uncertainty an econometric approach we specify a model of municipal labor demand when resource flows available to the municipality are uncertain the model allows us to test the hypothesis that employment decisions are rational in the sense that they incorporate all available information at the time that the decisions are made we find that for our sample of communities on the whole one cannot reject the hypothesis that labor demand is consistent with intertemporal utility maximization under uncertainty however small and large communities exhibit different behavior the employment decisions of small communities are consistent with the model while those of large communities are not

sources of mistrust an experimental case study of a central asian water conflict with the disintegration of the ussr a conflict arose between kyrgyzstan uzbekistan and kazakhstan over the transboundary syr darya river upstream kyrgyzstan controls the toktogul reservoir which generates hydropower demanded mainly in winter for heating downstream uzbekistan and kazakhstan need irrigation water in summer primarily to grow an export crop cotton regional agreements obliging kyrgyzstan to higher summer discharges in exchange for fossil fuel transfers from downstream riparians in winter have been unsuccessful due to lack of trust between the parties striving for self sufficiency in irrigation water uzbekistan initiated new reservoir construction this paper examines their economic impact we report a laboratory experiment modelling the syr darya scenario as a multi round three player trust game with non binding contracts payoff schemes are estimated using real life data while basinwide efficiency maximisation requires regional cooperation our results demonstrate that cooperation in the laboratory is hard to achieve uzbek reservoirs improve cooperation only weakly and their positive impact is limited to low water years

uniform externalities two axioms for fair allocation abstract positive resp negative preference externalities say that an agent always prefers his actual welfare to his virtual welfare should other agents share his preferences resp prefers his virtual to his actual welfare negative group externalities say that an agent never prefers his actual welfare to his virtual welfare should he be the sole user of the resources these two axioms unify several familiar fairness properties and yield some new ideas as well in the division of unproduced commodities and the cooperative production of a private or a public good we also discuss their compatibility with no envy and resource monotonicity

the time price of medical care an econometric mod el is used to impute the value of time in the demand for medical care for member s of a prepaid group practice medical care program separate estimates are obtai ned for 1 individuals who were employed full time 2 housewives and 3 ti me associated with taking children to a doctor for individuals who were employe d full time the estimate was close to the median wage rate sick leave was esti mated to substantially reduce the value of time it was concluded that ignoring the time price of medical care may result in misleading statistical analysis and mistaken policy recommendations copyright 1987 by mit press

sharing a river abstract a group of agents located along a river have quasi linear preferences over water and money we ask how the water should be allocated and what money transfers should be performed the core lower bounds require that no coalition should get less than the welfare it could achieve by using the water it controls the aspiration upper bounds demand that no coalition enjoy a welfare higher than what it could achieve in the absence of the remaining agents exactly one welfare distribution satisfies the core lower bounds and the aspiration upper bounds it is the marginal contribution vector corresponding to the ordering of the agents along the river journal of economic literature classification numbers d62 c71

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

sharing a river among satiable agents abstract we consider the problem of efficiently sharing water from a river among a group of satiable agents since each agent s benefit function exhibits a satiation point the environment can be described as a cooperative game with externalities we show that the downstream incremental distribution is the unique distribution which both is fair according to the aspiration welfare principle and satisfies the non cooperative core lower bounds on the other hand the cooperative core may be empty furthermore the downstream incremental distribution satisfies all core lower bounds for all connected coalitions if and only if each agent s individual rationality constraint is independent of the behavior of the other agents

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

the effect of time price on the demand for medical care services this paper analyzes the effect of time price on medical care demand and describes use of a reservation wage question from a household survey to develop a measure of time price for obtaining medical care a comprehensive three equation model of the demand for female medical care services examines choice of provider entry demand and the demand for physician visits results show that provider choice is based primarily on economic factors and that an expected high time price discourages women from choosing a public provider and from seeking gynecological maternal health or family planning services during the year yet does not influence the number of visits made once care is used the estimated model shows that medical care demand equations should control for the type of provider chosen and the opportunity cost of time for alternative activities when testing for a negative time price effect of obtaining medical care

the anti paradox of cooperation diversity may pay abstract this paper considers the stability and success of a public good agreement we allow for any type and degree of asymmetry regarding benefits and costs we ask the question whether asymmetry and which type and degree of asymmetry is conducive to cooperation we employ a simple non cooperative game theoretic model of coalition formation and derive analytical solutions for two scenarios an agreement without and with optimal transfers a central message of the paper is that asymmetry does not have to be an obstacle for successful cooperation but can be an asset we qualify two central results in the literature firstly the paradox of cooperation known since barrett 1994 and reiterated by many others afterwards stating that under those conditions when cooperation would matter most stable agreements achieve only little secondly a kind of coalition folk theorem known without proof in the literature for a long time stating that without transfers stable coalitions will be smaller with asymmetric than symmetric players we show that even without transfers the grand coalition can be stable if there is a negative covariance between benefit and cost parameters with massive gains from cooperation moreover with transfers many distributions of benefit and cost parameters lead to a stable grand coalition again some of them implying huge gains from cooperation stability and success greatly benefit from a very skewed asymmetric distribution of benefit and costs i e diversity may pay

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

market power in water markets abstract we model market power in water markets as multi market cournot competition with a river structure suppliers are connected through water balances which imposes resource constraints and they are connected to heterogeneous water users via a water delivery infrastructure our model captures a wide range of specific water market structures we establish conditions for existence of an equilibrium and we assess the effects of market power on water extraction delivery and water prices although the monopoly case is similar to standard economic theory three other specific water market structures illustrate that standard intuition has to be revisited

strong tiebout equilibrium under restricted preferences domain abstract we investigate the existence and give a partial characterization of a strong tiebout equilibrium which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods and moreover there exists no group of individuals who can all benefit by establishing their own community in particular no single individual finds it desirable to migrate from his equilibrium jurisdiction the existence proof makes use of the notion of consecutive games which we introduce and show that for such games there always exists a partition with a nonempty core

fixed term contracts and the dynamics of labour demand abstract we estimate a model of labour demand that accounts for dynamics arising from the relative costs of hiring and firing workers on either indefinite term contract itc or fixed term contract ftc we use a panel of 1000 french firms for which we can measure the number of entries and exits for each type of contract between 1988 and 1992 our estimates suggest that 1 it is much more costly to lay off workers under itc than to hire them 2 it is much less costly to adjust the number of ftc than to adjust the number of itc 3 the asymmetry between hiring and layoff costs is more important for non production than for production workers

health status and the demand for health results on price elasticities the relationship between measured health status and the elasticity of demand for ambulatory physician services is estimated using data from the national medical care utilization and expenditure survey nmcues although the theoretical relationship between health status and demand elasticity is ambiguous results obtained in this study suggest that declines in health reduce the elasticity of the initial decision to seek care but have no discernible effect on the elasticity of demand at mean levels of consumption these results are consistent with the findings of rand s hie and suggest that consumer price sharing has little effect on initial access to physicians for those in poor health

water sharing agreements sustainable to reduced flows by signing a water sharing agreement wsa countries agree to release an amount of river water in exchange for a negotiated compensation we examine the vulnerability of such agreements to reduced water flows among all wsas that are acceptable to riparian countries we find out the one which is self enforced under the most severe drought scenarios the so called upstream incremental wsa assigns to each country its marginal contribution to its followers in the river its mirror image the downstream incremental wsa is not sustainable to reduced flow at the source self enforcement problems can be solved by setting water releases and compensations contingent to water flow we apply our analysis to the aral sea basin we compute the upstream incremental compensations for the bishkek agreement and asses its vulnerability with historical flows

the socially stable core in structured transferable utility games we consider socially structured transferable utility games for every coalition the relative strength of a player is measured by a power function the socially stable core consists of the socially and economically stable payoff vectors it is non empty if the game itself is socially stable the socially stable core consists of a finite number of faces of the core generically it consists of a finite number of payoff vectors convex tu games have a non empty socially stable core irrespective of the underlying social structure when the game is permutationally convex the socially stable core is shown to be non empty if the power vectors are permutationally consistent and is shown to contain a unique element if the power vectors are permutationally compatible we demonstrate the usefulness of the concept of the socially stable core by applying it to structured hierarchy games sequencing games and the distribution of water

estimates of the demand for medical care under different functional forms we estimate price and income elasticities from a linear log linear and the almost ideal demand model with and without an adjustment for selectivity bias in an effort to show that special attention should be paid to the underlying assumptions of consumer behaviour when estimating a medical care demand model the literature on medical care utilization is extended by incorporating two major components of spending as separate demands in a system of medical care spending we find that estimates of elasticities vary depending on the functional form of the estimating equation thus questioning the usefulness for policy purposes of single estimates of elasticities

let them eat cake a note on comparing alternative models of the demand for medical care this article comments on the rand econometric approach to estimating and testing models of the demand for medical care as typified in duan et al 1983 the rand methodology is contrasted with more mainstream econometric approaches to similar empirical problems as developed in the sample selection literature it is shown that despite rand s claim their approach requires some fairly unusual assumptions on the model joint error distribution and functional form alternatively their model likelihood functions may be interpreted as being nested in more general sample selection model likelihood functions with easily testable parameter restrictions

do hmo plans reduce health care expenditure in the private sector i introduction since the hmo act was passed in 1973 health maintenance organizations hmos have become one of the most popular types of managed care plans in the u s health delivery system faced with a dramatic increase in health care costs hmos are designed to implement a tight utilization review and authorization process along with restricted choice of providers as a means of managing utilization and quality by comparing health care expenditure patterns of hmo members with those of non hmo members among the privately insured nonelderly population this study seeks to understand the impact that hmos have on health care expenditure in the private insurance sector our data come from the 2000 medical expenditure panel survey meps a nationally representative survey of the u s civilian noninstitutionalized population despite the dramatic growth in the number and proportion of individuals enrolled in private hmo plans much of existing research on this issue has focused on the relationship between hmo enrollment and use of health care services miller and luft 1994 2002 whereas only a limited number of studies have been conducted on the role of prevalent hmo enrollment in saving health care expenditure kralewski et al 2000 analyses on expenditure performance are mostly carried out on the performance of the medicaid or medicare managed care plans buchanan et al 1996 mello et al 2002 this study extends previous research in several ways first rather than using localized or insurance group wise data johnson and aquilina 1986 kralewski et al 2000 mclaughlin et al 1983 mclaughlin 1987 robinson 1996 or employer data baker and corts 1996 feldman et al 1993 we use data provided directly by hmo members through nationally representative surveys second by using decomposed expenditure data we are able to ascertain whether the provision of financial incentives to both consumers and providers in hmo plans makes any differences in medical care expenditure by each party compared with traditional plans furthermore by testing the hypothesis of selectivity in health insurance choice we try to avoid the biased findings that often find in favor of hmo plans trends and relevance during the past two decades the number of hmo enrollees has proliferated from 9 1 million 4 of the total population in 1980 to 76 1 million 26 4 in 2001 health united states 2003 between 1977 and 2001 the percentage of the u s population under age 65 that joined private insurance hmos increased dramatically from 3 7 to 27 9 table 1 over the same time period per capita national health expenditure increased from 1 980 to 4 773 in 1995 constant dollars and total national health expenditure as a percentage of gross domestic product rose from 8 8 to 14 1 out of total national health expenditure the share of private expenditure decreased from 57 3 to 54 1 motivated by the prevalence of hmos in the private insurance market and the insufficiency in understanding its cost containment performance we investigate the patterns of health care expenditure among hmo members to understand whether hmos contribute to limiting medical expenditure relative to non hmo arrangement there are two main complications to our empirical analysis the first is selection bias due to endogenous health plan choice decisions previous studies buchanan and cretin 1986 jackson beeck and kleinman 1983 suggest that the utilization reduction effect of hmos may be a consequence of the selective enrollment of a healthier population in hmo plans rather than the more efficient medical care delivery management of hmos thus we first estimate the probit model of health insurance plan choice decisions and test this hypothesis in line with the analysis of taylor et al 1995 the second complication is that the dependent variables are nonnegative with a high frequency of zero observations

sharing a polluted river abstract a river carries pollutants to people living along it if it is polluted to make the water in the river clean some costs are incurred this poses a question of how to split the costs of cleaning the whole river among the agents located along it to answer this question we resort to the two main advocated doctrines in international disputes the theory of absolute territorial sovereignty ats and the theory of unlimited territorial integrity uti applying these two doctrines we accordingly propose two methods the local responsibility sharing lrs method and the upstream equal sharing ues method for each method we provide an axiomatic characterization interestingly both the lrs method and the ues method coincide with the shapley value solutions to the corresponding cost games that are naturally induced according to the ats and the uti doctrines respectively

the environment as a commodity all economic activity is based ultimately on re sources found in nature whether it is consumption the point in exposing the morphology of produced or production or whether it is exchange the comgoods and services is not to construct a resource moditi es which are involved are made of constitutheory of a value there are any number of natural ents provided by nature thus the ingredients of resources and this alone precludes such an at any manufactured good are other produced goods tempted theory from being coherent my purpose labour time and skills and natural resources each rather is to use it to express surprise at the fact that of these constituent produced goods is in turn made despite the centrality of natural resources in eco up from the ingredients that went into its manufacnomic activity they find little room in economics ture namely labour time and skills natural rediscourses interest in resource economics more sources and further produced goods it follows particularly environmental economics has only that any manufactured commodity is ultimately a been intermittent and if we are currently witness combination of labour and natural resources ing a resurgence and this special issue is an ex ample of it we have also just lived through a labour too is a produced good even raw labour is decade long neglect during which much valuable an output manufactured by those natural resources research could have been done 2 we are way behind which sustain life resources such as the multitude where we should have been and could have been

sharing the costs of cleaning a river the upstream responsibility rule jorge alcalde unzu acknowledges the financial support from the spanish government through the project eco2012 34202 and fundacion ramon areces maria gomez rua acknowledges the finan cial support from the spanish government through the project eco2011 23460 and the galician government through the project 2013xgcedu08072013emer elena molis acknowledges the financial support from the spanish government through the projects eco2012 31346 and eco2013 44879 r from the consejeria de economia innovacion ciencia y empleo junta de andalucia through the projects sej 492 and sej 1436 and from the basque government through the project it568 13

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

regulation via the polluter pays principle we consider the problem of regulating an economy with environmental pollution we examine the distributional impact of the polluter pays pp principle which requires that any agent compensates all other agents for the damages caused by his or her pollution emissions with constant marginal damages we show that regulation via the pp principle leads to the unique welfare distribution that induces non negative individual welfare change and renders each agent responsible for his or her pollution impact we extend both the pp principle and this result to increasing marginal damages due to pollution we also compare the pp principle with the vickrey clark groves scheme

hmo plans self selection and utilization of health care services this study examines the effect of health maintenance organizations hmos on the use of health care services among the privately insured nonelderly population to consider jointly the possible self selection bias and high frequency of zero observations in the applied utilization measures we accommodate the endogeneity of health plan choice decisions in the censored regression model using data from the 2000 medical expenditure panel survey we find strong evidence for favourable self selection into hmo plans health maintenance organization enrollment is found to encourage greater use of office based and hospital outpatient services overall satisfaction with the quality of care among hmo members is relatively low compared to that among nonhmo members these findings suggest that more effort is needed to develop management strategies in hmos in order to contain the moral hazard in utilization and assure the quality of service provided within the network of hmo providers