capitalization of government support in agricultural land prices what do we know abstract the objective of this paper is to provide an overview of existing literature both theoretically and empirically on the extent to which agricultural subsidies do translate into higher land values and rents and finally benefit landowners instead of agricultural producers our review shows that agricultural support policy instruments contribute to increasing the rental price of farmland and that the extent of this increase closely depends on the level of the supply price elasticity of farmland relative to those of other factors inputs on the one hand and on the range of the possibilities of factor input substitution in agricultural production on the other hand the empirical literature shows that land prices and rents have in general a significant positive and inelastic response to government support such inelastic response is thought to reflect the uncertain future of the farm programmes and in general studies have indicated that land prices are more responsive to government based returns than to market based returns

price regulation in the pharmaceutical industry prescription or placebo president clinton and several legislators have proposed restrictions on price increases in the pharmaceutical industry similar to those on some public utilities studies however suggest that under conditions of rapidly changing demand as found in pharmaceuticals price caps could be manipulated using simulations we show that in reaction to regulation pharmaceutical firms would optimally set launch prices 50 percent higher than in an unregulated market although initially hurt after seven years consumers benefit as the unregulated price rises above the price cap thus before enacting legislation congress should assess america s willingness to pay more now for lower prices in the future

a new look at the returns and risks to pharmaceutical r d this study investigates the returns to r d for 100 new drugs introduced into the united states during the decade of the 1970s in contrast to prior studies it incorporates several significant structural changes that have occurred in the pharmaceutical industry during the 1980s these include higher real drug prices and a greater degree of generic competition a major finding is that the return on r d for the average new drug is approximately equal to the 9 percent industry cost of capital however the performance of new drugs introduced during the latter half of the 1970s was markedly better than that of early 1970s introductions this latter finding is consistent with the more rapid rate of industry growth in real r d expenditures the study also finds that the variation in returns is highly skewed with only the top 30 drugs covering mean r d costs on a fully allocated basis finally it is shown that real drug price increases in the 1980s were necessary for the average new drug introduction to recover its r d costs

drug prices and research and development investment behavior in the pharmaceutical industry abstract this paper argues theoretically and shows empirically that pharmaceutical r d spending increases with real drug prices after holding constant other determinants of research and development r d specifically an estimated elasticity suggests that a 10 percent increase in the growth of real drug prices is associated with nearly a 6 percent increase in the growth of r d intensity simulations that are based on our multiple regression model indicate that the capitalized value of pharmaceutical r d spending would have been about 30 percent lower if the federal government had limited the rate of growth in drug price increases to the rate of growth in the general consumer price index during the period 1980 2001 moreover the results suggest that a drug price control regime would have resulted in 330 65 fewer new drugs representing over one third of all actual new drug launches brought to the global market during that time period

optimal inventory and hedging decisions with cvar consideration abstract we consider a newsvendor who makes an ordering decision to meet stochastic demand and buys a put option written on the demand to hedge against the risk of low demand to maximize his expected utility which is measured by the conditional value at risk cvar the put option is fairly priced with specifications for the strike price and the strike quantity with the consideration of lost sale penalty cost we derive structural results on the optimal ordering and hedging polices we show that the newsvendor will not order more than that without the option contract when the strike quantity is pre determined and low and he will order more when the strike quantity is a decision variable moreover the optimal strike quantity is less than or equal to the optimal order quantity in the risk neutral setting and interestingly there are cases in which the optimal hedging ratio first increases then keeps constant as the newsvendor becomes less risk averse we also show that the value of the put option increases as the newsvendor becomes more risk averse and demand becomes more uncertain furthermore the effect of risk aversion on the value of the option highly depends on the magnitudes of the system parameters

option pricing with downward sloping demand curves the case of supply chain options this article investigates the role of option contracts in a supply chain when the demand curve is downward sloping we consider call put options that provide the retailer with the right to reorder return goods at a fixed price we show that the introduction of option contracts causes the wholesale price to increase and the volatility of the retail price to decrease in general options are not zero sum games conditions are derived under which the manufacturer prefers to use options when this happens the retailer is also better off if the uncertainty in the demand curve is low however if the uncertainty is sufficiently high then the introduction of option contracts alters the equilibrium prices in a way that hurts the retailer

customer and retailer rebates under risk aversion abstract in a supply chain setting we analyze a manufacturer s customer and retailer rebates which are sales incentives offered to the end buyers and retailers respectively the performance of both rebates is influenced by the retailer s objective and response to the promotion due to his intermediary position in the channel earlier studies investigating rebates in distribution channels have traditionally assumed that the retailer is risk neutral with the objective of maximizing expected profits in our paper we consider a risk averse retailer we formally model risk aversion by adopting the conditional value at risk cvar decision criterion using a stochastic and effective price dependent demand we analyze the manufacturer s rebate amount decisions and the retailer s joint inventory and pricing decisions in a game theoretical framework we provide several structural properties of the objective functions and show monotonicity of the retailer s decisions in the degree of risk aversion for the case of retailer rebates we characterize the unique equilibrium and for the case of customer rebates we prove the existence of an equilibrium using numerical examples we provide further insights on the impact of risk aversion for example given an exogenous wholesale price we observe a threshold value on the retailer s risk aversion parameter below above which the manufacturer is better off with retailer rebates customer rebates implying that the manufacturer s preferred rebate type can be different depending on whether the retailer is risk neutral or sufficiently risk averse

assessing the influence of direct payments on the rental value of agricultural land economic theory suggests that coupled and decoupled direct payments have different impacts on agricultural rental values because of the different production responses associated with these payments this study investigates the impact of both coupled and decoupled eu cap direct payments on rental values in northern ireland using panel data taken from the farm business survey for the period from 1994 to 2002 theoretically agricultural land rents are a function of expected market returns and expected associated direct payments the unobservable nature of expected returns means that actual market returns must be used as a proxy for the former in the empirical specification as a consequence the problem of bias due to expectation error arises using a gmm technique to take account of this problem the results of this study show that the impact of cap direct payments on rental values depends on the type of payment and on the nature of the production characteristics of the associated agricultural commodity

solutions for flexible container leasing contracts with options under capacity and order constraints abstract the container shipping market becomes prosperous with the development of the global economy as shipping networks become more complex and heterogeneous container capacity planning becomes more difficult this paper tackles the container planning problem from the carrier s perspective in a two echelon container shipping service chain cssc which includes one carrier and one upstream rental company a flexible contract with options is introduced into the one period container planning mechanism with the flexible options contract the rental company requires the carrier to make a commitment or place an order in advance options give buyer the right to modify the initial orders to better match the supply with the demand based on the carrier s decision tendency i e aggressive or conservative we analyze the application strategies of the unilateral options and the bidirectional options in different practical scenarios in particular for the applicability of the decision models we further consider the shipping capacity and the minimum order constraints and formulate the carrier s option policies with constrained nonlinear programs numerical examples show that the proposed decision strategies with option contract cannot only effectively increase the container trading quantity between the rental company and the carrier but also significantly reduce the carrier s container capacity risk while increasing its profit

the impact of customer returns on pricing and order decisions abstract in this paper we address the simultaneous determination of price and inventory replenishment when customers return product to the firm we examine cases when the quantity of returned product is a function of both the quantity sold and the price in single and multi period problems with and without uncertainty in demand we derive results for optimal prices and order quantities and discuss how the firm should change price and inventory quantities in order to mitigate the negative effects of returns from customers

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

pricing and patents of hiv aids drugs in developing countries this article provides empirical evidence on the impact of patents on drug prices across developing countries it uses sales data on human immunodeficiency virus hiv acquired immuno deficiency syndrome aids drugs in a sample of 34 low and middle income countries between 1995 and mid 2000 the main findings are that patents do shift drug prices up drug prices are correlated to per capita income levels and drug firms follow a skimming strategy when pricing new hiv aids drugs that is there is across country and intertemporal price discrimination in the global drug markets

coordinating a decentralized supply chain with customer returns and price dependent stochastic demand using a buyback policy abstract we investigate a decentralized supply chain that consists of a manufacturer and a retailer where the retailer simultaneously determines the retail price and order quantity while experiencing customer returns and price dependent stochastic demand we propose an agreement between the manufacturer and the retailer that includes two buyback prices one for unsold inventory and a second for customer returns and show that this type of easy to implement agreement can achieve perfect supply chain coordination and be a win win for both manufacturer and retailer when a complementary profit sharing agreement is included

a simple model of pharmaceutical price dynamics abstract branded pharmaceutical firms use price and promotional strategy to manage public knowledge about their drugs we propose a dynamic theory of pharmaceutical pricing and conduct an exploratory empirical analysis inspired by the theory our theory predicts a pattern of increasing prices and decreasing promotional activities over a drug s life cycle prices are kept low and advertising levels high early in the life cycle in order to build public knowledge about the drug as knowledge grows prices rise and advertising falls if the management of this stock is important enough this tendency of prices to rise can overwhelm the price decreasing effect of entry by generic competitors late in the drug life cycle we argue that our theory of price dynamics explains empirical regularities in this industry

the measurement of retail output and the retail revolution the computerization of retailing has made price dispersion a norm in the united states so that any given list price or transactions price is an increasingly imperfect measure of a product s resource cost as a consequence measuring the real output of retailers has become increasingly difficult food retailing is used as a case study to examine data problems in retail productivity measurement crude direct measures of grocery store output suggest that the cpi for food at home may have been overstated by 1 4 percentage points annually from 1978 to 1996 this abstract was borrowed from another version of this item

who really benefits from agricultural subsidies evidence from field level data if agricultural subsidies are largely capitalized into farmland values then expanding support for agriculture may not benefit farmers who rent the land they farm suddenly reducing subsidies may be problematic to the extent that land values already embody expectations about future subsidies existing evidence on the incidence of subsidies on land values is mixed identification is obscured by unobserved or imprecisely measured factors that tend to be correlated with subsidies especially land quality and time varying factors like commodity prices and adverse weather events a problem that has received less attention is the fact that subsides and land quality on rented land may differ from owned land since most farms possess both rented and owned acreage farm level measures of subsidies land values and rental rates may bias estimated incidence using a new field level data set that for the first time precisely links subsidies to land parcels we show that this bias is considerable where farm level estimates suggest an incidence of 20 to 79 cents of the marginal subsidy dollar field level estimates from the same farms indicate that landlords capture just 10 25 cents the size of the farm and the duration of the rental arrangement have substantial effects incidence falls by 5 15 cents per acre when doubling total operated acres and the incidence falls by 0 1 1 2 cents with each additional year of the rental arrangement low incidence of subsides on rents combined with the farm size and duration effects suggest that farmers renting land have monopsony power

channel bargaining with risk averse retailer abstract we first consider a supply chain with one manufacturer and one retailer where there is only one product with stochastic demand the retailer is risk averse with conditional value at risk cvar as her risk measure and the manufacturer is a risk neutral agent we model the problem as a nash bargaining problem where the manufacturer and the retailer negotiate about the wholesale price and order quantity we show that there exists a nash bargaining equilibrium for the wholesale price and order quantity with equal and unequal bargaining power we also find that even for the equal bargaining power between the two agents the retailer s bargaining power for the supply chain profit increases as she becomes more risk averse we then extend the model to the case where demand is endogenous and can be manipulated by setting the retail price we show that there exists a nash bargaining equilibrium for the wholesale price retail price and the order quantity under equal bargaining power

the capitalization of coupled and decoupled cap payments into land rental rates this article explores the extent to which payments under the common agricultural policy cap are capitalized into land rents in ireland with implications for the transfer efficiency of such payments since subsidies may not benefit targeted recipients if they are capitalized into input prices capitalization in the years preceding and following the decoupling of agricultural support payments from agricultural production is explored in the period prior to decoupling direct support pillar 1 payments were highly capitalized into irish agricultural rents 67 90 cents per euro of subsidies while in the post decoupling period capitalization appears to have declined somewhat

who are the producers and consumers value chains and food policy effects in the wheat sector in pakistan we develop a disaggregated nominal rate of assistance nra methodology to disentangle the welfare impacts of policies for various interest groups along the value chain to disaggregate effects within the producer and consumer umbrellas we apply our value chain nra methodology to the case of pakistan s wheat price and trade policy we analyze the welfare implications for various agents in the wheat flour value chain from 2000 to 2013 a period characterized by major global price volatility and by regular adjustments of domestic policies we find that the wheat policy has generally benefitted flour consumers and wheat traders at the expense of wheat farmers with limited effects on flour millers our findings illustrate that the welfare implications of policies can be quite different within the producer and consumer umbrellas which has potentially important implications for economic and political economy analyses and for the design of policies that aim to target the poorest groups along value chains

managing consumer returns in a competitive environment this paper investigates the pricing and restocking fee decisions of two competing firms selling horizontally differentiated products we model a duopoly facing consumers who have heterogeneous tastes for the products and who must experience a product before knowing how well it matches with their preferences the analysis yields several key insights restocking fees not only can be sustained in a competitive environment but also are more severe when consumers are less informed about product fit and when consumers place a greater importance on how well products attributes fit with their preferences we compare the competitive equilibrium prices to a scenario in which consumers are certain about their preferences and find conditions defining when consumer uncertainty results in higher equilibrium prices comparison to a monopoly setting yields a surprising result equilibrium restocking fees in a competitive environment can be higher than those charged by a monopolist this paper was accepted by jagmohan s raju marketing

the impacts of different farm programs on cash rents county level annual observations for iowa from 1996 through 2000 were used to measure the impacts of farm program payments on cash rental rates the econometric analysis explicitly incorporates spatial autocorrelation cash rental rates were found to increase by almost one dollar per acre for each additional dollar per acre paid for market loss assistance and production flexibility contracts whereas conservation reserve program payments appear to exert no effect on cash rental rates a counterintuitive finding that warrants further examination is the small but negative impact of deficiency payments on cash rental rates

pricing of drugs with heterogeneous health insurance coverage in this paper we examine the role of insurance coverage in explaining the generic competition paradox in a two stage game involving a single producer of brand name drugs and n quantity competing producers of generic drugs independently of brand loyalty which some studies rely upon to explain the paradox we show that heterogeneity in insurance coverage may result in higher prices of brand name drugs following generic entry with market segmentation based on insurance coverage present in both the pre and post entry stages the paradox can arise when the two types of drugs are highly substitutable and the market is quite profitable but does not have to arise when the two types of drugs are highly differentiated however with market segmentation occurring only after generic entry the paradox can arise when the two types of drugs are weakly substitutable provided however that the industry is not very profitable in both cases that is when market segmentation is present in the pre entry stage and when it is not the paradox becomes more likely to arise as the market expands and or insurance companies decrease deductibles applied on the purchase of generic drugs

r d in the pharmaceutical industry a world of small innovations it is commonly argued that in recent years pharmaceutical companies have targeted their research and development r d at small improvements of existing compounds instead of riskier drastic innovations in this paper we show that the bias in the pharmaceutical industry toward small innovations might be driven by the low sensitivity of the demand in particular small innovations get a proportionally larger reward because pharmaceutical firms target them at the inelastic segments of the demand as a consequence firms find it relatively more profitable to invest in small innovations we also study the effect on r d incentives of marketing strategies and regulatory instruments aimed at controlling pharmaceutical expenditure

advertising and competition in the ethical pharmaceutical industry the case of antihypertensive drugs abstract this paper uses data on the majority of name brand antihypertensive drugs marketed in the united states during 1988 93 to test the hypothesis that advertising decreases the price elasticity of demand in the pharmaceutical industry this is the first study to directly estimate the effects of drug product promotion on the price elasticity of demand in this industry we find strong evidence of an advertising effect in particular detailing efforts the salient means for product promotion in this industry systematically lower price sensitivity given the inverse relationship between elasticity of demand and price it is likely that consumers pay higher prices as a result of the advertising that occurs in this industry our findings are thus consistent with hurwitz and caves who find evidence that advertising inhibits entry into this market but in contrast to earlier research that found no anticompetitive effect

technical note a risk averse newsvendor model under the cvar criterion the classical risk neutral newsvendor problem is to decide the order quantity that maximizes the one period expected profit in this note we consider a risk averse newsvendor with stochastic price dependent demand we adopt conditional value at risk cvar a risk measure commonly used in finance as the decision criterion the aim of our study is to investigate the optimal pricing and ordering decisions in such a setting for both additive and multiplicative demand models we provide sufficient conditions for the uniqueness and existence of the optimal policy comparative statics show the monotonicity properties and other characteristics of the optimal pricing and ordering decisions we also compare our results with those of the newsvendor with a risk neutral attitude and a general utility function

why competition may drive up prices abstract we show that the expected price of an incumbent firm may increase in response to increasing competition as it may become more profitable to exploit a rather immobile fraction of consumers instead of capturing a larger but more contested segment of the market to derive this result we consider two approaches of modelling the degree of competition first in a duopolistic setting competition is said to be more intense if the entrant s product becomes more attractive to the mobile fraction of buyers in this case we find that all buyers i e both the mobile and the immobile fraction may lose if the market becomes more competitive secondly in a model with two entrants competition is said to become intense if entrants serve an overlapping segment of the market for mobile buyers

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

robust inventory decision under distribution uncertainty a cvar based optimization approach abstract we study the robust inventory decision making problem faced by risk averse managers with incomplete demand information in a newsvendor setting three basic models are developed expected profit maximization cvar based profit maximization and a combination of the two each model is robustly formulated under the assumption of ellipsoid discrete distribution and again under the box discrete distribution each robust model can be mathematically transformed into a second order cone program for ellipsoid uncertainty or into a general convex optimization problem for box uncertainty both transformed problems can be optimally solved directly we offer propositions with proof to show the equivalence of the transformed problems with the original ones numerical examples are given to validate the proposed approach we find that the performances under both ellipsoid and box uncertain distributions are robust finally sensitivity analysis with respect to risk averse levels and trade off coefficients is conducted to validate the proposed models and solution approaches

supply contract with bidirectional options the buyer s perspective abstract this paper develops a single period two stage supply contract with bidirectional options by which the buyer can adjust the initial order both upward and downward at the beginning of the planning horizon the buyer places an initial order and purchases options after updating the demand forecast the buyer exercises options to adjust the initial order we analyze the contract from the buyer s perspective and formulate the buyer s optimal policies in particular we obtain closed form formulae to describe the buyer s optimal behavior when the demand is uniformly distributed we also analyze how the parameters affect the buyer s behavior and prove numerically that using bidirectional options can improve the buyer s profit

pricing profits and technological progress in the pharmaceutical industry the decades old debate over pharmaceutical industry prices profits and innovation has again intensified a number of events coalesced to refocus public interest on pharmaceuticals contributing to public concern were bureau of labor statistics price index increases for pharmaceuticals far outpacing those for the products of other industries another prominent characteristic of the pharmaceutical industry has been its extraordinarily high reported profitability this article examines the phenomena that precipitated the current pharmaceuticals debate their historical antecedents and the principal questions at issue in the author s considered judgment a pell mell march toward regulation of pharmaceutical industry pricing could seriously impair the industry s incentives for investment in new products

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

risk aversion in inventory management traditional inventory models focus on risk neutral decision makers i e characterizing replenishment strategies that maximize expected total profit or equivalently minimize expected total cost over a planning horizon in this paper we propose a framework for incorporating risk aversion in multiperiod inventory models as well as multiperiod models that coordinate inventory and pricing strategies we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk neutral inventory and pricing policies these structural results are extended to models in which the decision maker has access to a partially complete financial market and can hedge its operational risk through trading financial securities computational results demonstrate that the optimal policy is relatively insensitive to small changes in the decision maker s level of risk aversion

do decoupled payments affect u s crop area preliminary evidence from 1997 2000 the federal agriculture improvement and reform fair act of 1996 changed the manner in which the u s government provides direct payments to u s farmers under the fair act producers are eligible for fixed production flexibility contract pfc payments independent of the production of specific crops 1 with a few exceptions 2 supplemental market loss assistance mla payments authorized in subsequent legislation have been made to producers under similar terms i e a producer cannot increase or decrease mla payments by increasing or decreasing production the united states has declared that pfc

optimal ordering quantities for multi products with stochastic demand return cvar model abstract multi product ordering problem with stochastic demand is often optimized by the expected cost reduction or the expected profit improvement in most of previous works moreover risk preference of decision maker is often ignored evidently this approach is impracticable when the corresponding volatility is larger based on the outstanding characteristics of conditional value at risk cvar as a risk measure the paper proposes an optimal order model for multi product with cvar constraints also the model is finally formulated as a linear programming problem the model is simulated for the case of a newsvendor to analyze to what degree it succeeds the solution in fact is bound consistent fully with the decision maker s intuition on return risk decision making finally results of return cvar model and the classical model are compared and shows that return cvar model is more flexible than the classical model

welfare effects of global patent protection this paper uses a simple model of invention and patent protection to examine the welfare effects of extending patent protection from the country where invention takes place to another country that is only a consumer of invented products it is shown that while the welfare of the inventing country certainly rises with the extension of patent protection that of the other country probably falls and may well fall by more than the increase in welfare of the inventing country in particular as patent protection is extended to a larger and larger portion of the world the effect on the welfare of the world as a whole of extending it to the rest of the world becomes negative

tiered co payments pricing and demand in reference price markets for pharmaceuticals health insurance companies curb price insensitive behavior and the moral hazard of insureds by means of cost sharing such as tiered co payments or reference pricing in drug markets this paper evaluates the effect of price limits below which drugs are exempt from co payments on prices and on demand first using a difference in differences estimation strategy we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand name drugs in the german reference price market second estimating a nested logit demand model we show that consumers appreciate co payment exempt drugs and calculate lower price elasticities for brand name drugs than for generics this explains the different price responses of brand name and generic drugs and shows that price related co payment tiers are an effective tool to steer demand to low priced drugs

price regulation and relative delays in generic drug adoption abstract increasing the adoption of generic drugs has the potential to improve static efficiency in a health system without harming pharmaceutical innovation however very little is known about the timing of generic adoption and diffusion no prior study has empirically examined the differential launch times of generics across a comprehensive set of markets or more specifically the delays in country specific adoption of generics relative to the first country of generic adoption drawing on data containing significant country and product variation across a lengthy time period 1999 2008 we use duration analysis to examine relative delays across countries in the adoption of generic drugs our results suggest that price regulation has a significant effect on reducing the time to launch of generics with faster adoption in higher priced markets the latter result is dependent on the degree of competition and the expected market size

pricing patent loss and the market for pharmaceuticals dustry the drug price competition and patent term restoration act of 1984 very clearly reflects the determination of policy makers to simultaneously address issues of price control and technical progress the 1984 act increased returns to innovation by extending the period of patent protection to take into account the time between receipt of a patent and food and drug administration fda approval of a drug for sale in the market the 1984 act also reduced the testing requirements for approval of new generic brands of existing chemical entities thus reducing entry barriers in markets where patents have expired the expected outcome from eased entry conditions for generic substitutes was substantially enhanced price competition and lower prices for brand name drugs in fact prices for brand name drugs have tended to increase following entry by generics wagner and duffy 28 examined price changes for top selling generics and name brands they show substantial price increases in brand name prices accompanying large reductions in generic prices as entry of generics occurs grabowski and vernon 9 examined data on 18 major orally administered rug products subject to generic competition between 1983 and 1987 and found that the name brand price increased by an average of 7 one year subsequent to generic entry and 11 two years following generic entry

regulation and firm size fda impacts on innovation this article estimates the highly differential impacts of fda regulations on pharmaceutical firms of various sizes where size is measured as scale of r d expenditures estimation is performed using the method of maximum quasi likelihoods using productivity trends of the united kingdom as a control to isolate fda regulatory effects in the united states it is shown that smaller u s pharmaceutical firms suffered devastating reductions in research productivity because of fda regulations in contrast the largest u s pharmaceutical firms apparently benefited from regulation as sales gains due to reduced competition more than offset their quite moderate declines in research productivity

common agricultural policy effects on dynamic labour use in agriculture abstract the aim of this study is to investigate the effects of direct payments and rural development measures of the eu s common agricultural policy cap on employment in agriculture we work with a dynamic labour demand equation augmented by the full set of policy instruments of the cap which is estimated on a panel dataset of 69 east german regions we present results for four estimators which differ in how they eliminate the fixed effects and how they address the endogeneity of the lagged dependent variable the results suggest that there were few desirable effects on job maintenance in agriculture while there is some indication that investment subsidies have halted labour shedding on farms a rise in the general wage level reduced labour use in agriculture changes in direct payments had no employment effects generally labour adjustment exhibits a strong path dependency

generic entry price competition and market segmentation in the prescription drug market abstract this paper studies the effects of generic entry on post patent price competition for 18 prescription drugs recently exposed to competition an independent validating test of the generic competition paradox is conducted using a newly created data set each generic entrant is associated with an average 1 increase in the branded price the one way error component model accounts for intermolecular competition market segmentation and endogeneity of entry and finds branded prices increasing by 2 alternative definitions of entry suggest that price competition is confined to the generic market the unique payer type feature of the data offers empirical evidence supporting market segmentation

loss averse newsvendor model with two ordering opportunities and market information updating abstract a fashion supply chain characterized by a long lead time and a short selling season is considered in this paper facing demand uncertainty the risk averse retailer has two opportunities to make order decisions before the demand is realized the risk aversion is modelled as a penalty to the decision maker the retailer if a target profit is not attained we derive the retailer s optimal ordering decisions and analyze the monotonicity behaviours of the critical market signal the optimal first stage order quantity and the optimal expected payoff with respect to the penalty coefficient we also examine the impact of demand forecast quality on the retailer s decisions and extend the study to the case where order cancellation is allowed

the optimal organization of research evidence from eight case studies of pharmaceutical firms abstract in this paper we examine the results of interviews of scientists and executives in eight pharmaceutical companies on the issue of how best to organize the rd when the firm is playing catch up in an area of science where it is weak and when governmental policies force firms to carry out r d in particular locations

the impact of customer returns and bidirectional option contract on refund price and order decisions abstract this study investigates the impacts of customer returns and a bidirectional option contract on a newsvendor firm s refund price and order decisions the stochastic demand is refund price sensitive we show that the optimal refund price increases with the option price and decreases with both the wholesale and exercise prices while the optimal order quantity increases with the exercise price but decreases with both the wholesale and option prices furthermore we illustrate that in the presence of customer returns the optimal refund price and order quantity decrease the firm should cut the refund price and order more products if a bidirectional option contract is available we identify the conditions under which a firm should offer a full partial or no refund policy we also show that a bidirectional option contract can reduce the negative impact of customer returns and enhance the firm s profit especially under high demand uncertainty

impact of risk aversion on optimal decisions in supply contracts abstract we introduce the concept of conditional value at risk as the evaluation criterion in a supply contract model we first derive the manufacturer s optimal decisions and then analyze the impact of risk aversion on the manufacturer s decisions we follow by conducting numerical experiments to observe how the manufacturer s risk attitude affects his decisions we obtain results that characterize the explicit relationship between the manufacturer s risk attitude and his optimal decisions we also show the dependence of the decision variables on the price and cost parameters which is seldom given in the literature

generics and new goods in pharmaceutical price indexes drug prices and their rate of inflation are a major focus of current policy debates on u s health care in this paper we show that where patent expiration and generic entry are significant as they are for many important classes of drugs movements in the official price indexes may be poor indicators of the actual prices paid and the resulting changes in consumer welfare when a drug goes off patent those consumers who regard the branded and generic versions as more or less perfect substitutes experience a substantial price decline and concomitant welfare gain which the current methods used by the statistical agencies fail to capture we suggest a number of alternative ways of proceeding although our computations are based on a limited number of cases they imply that the overall rate of inflation in drug prices may be quite seriously overstated while generic pharmaceuticals are the topic of our calculations the problem discussed is also of wider importance generic drugs are a special and possibly easy case

a value based approach to option pricing the case of supply chain options chapter 6 explores the pricing issue for supply chain options in classical research this issue is generally considered in the stackelberg game framework such a pricing scheme however is usually unacceptable to the follower since the leader always captures all the surplus derived from the options being different from the existing literature this chapter develops a value based pricing scheme for supply chain options with two modeling scenarios including a single retailer and multiple retailers the intuition behind such a pricing scheme is to price the option based on the value inherent in the option right as shown in the research such a pricing scheme can assure that each of the contracting partners captures a share of the surplus derived from the options as a result the pricing schemes developed in this chapter are more objective and fair and consequently are more likely to be accepted by the contracting partners as compared with those that follow the stackelberg game approach

on the determination of the us aggregate health care expenditure per capita real health care expenditure is examined against three major groups of explanatory variables economic demographic and health stock and it is found that the three groups of variables have an impact on real health care spending other subcategories such as real private and government health care pharmaceutical dental home nursing ambulatory personal medical consumption and in patient expenditures have also been examined and have been found to be affected by the explanatory variables for several subcomponents there is evidence of supplier inducement of the demographic group of variables the ageing population had an impact only on the per capita real overall and private health care outlay and pharmaceutical spending also cointegrating relationships were found and consistent estimators of the elasticities found

the price premium of generic to brand names and pharmaceutical price index the price premium of generic pharmaceuticals to brand names is examined under different competitive market situations the result of this study shows that the number market share and the age of both brand name and generic products have the most explanatory power for explaining the price premium this study further applies this method to a pharmaceutical price index in order to explain drug price index perplexities

the impact of decoupled payments on u s cropland values an extensive literature has shown that various farm programs may influence the value of farmland but other studies have not examined the cropland price effects of direct or decoupled payments separate from countercyclical payments this study uses nationally representative confidential field level panel data with farmer reported per acre land values we analyze the impact of decoupled and other farm program payments on farmland values using a fixed effects model and controlling for various factors that influence farmland values we find that an additional dollar of decoupled payments has a large and statistically significant impact on farmland values of about 18 per acre these results are comparable with similar studies undertaken in europe

regulation of pharmaceutical prices evidence from a reference price reform in denmark reference price systems for prescription drugs constitute widely adopted cost containment tools under these regimes patients co pay a fraction of the difference between a drug s pharmacy retail price and a reference price that is set by the government reference prices are either externally based on drug prices in other countries or internally based on domestic drug prices determined we study the effects of a change from external to internal reference pricing in denmark in 2005 we find that the reform led to substantial reductions in retail prices reference prices and patient co payments as well as to sizable decreases in overall producer revenues and health care expenditures the reform induced consumers to substitute away from branded drugs for which we estimate strong preferences the increase in consumer welfare due to the reform therefore depends on whether or not we take perceived quality differences into account in its calculation

capitalization of the single payment scheme into land value generalized propensity score evidence from the eu this paper estimates the capitalization of the single payment scheme sps into land values the theory suggests a nonlinear and discontinuous relationship between the sps and land rents in empirical analysis we employ unique farm level panel data and apply the generalized propensity score matching approach our estimates suggest a 6 to 10 sps capitalization rate on average in the european union the nonfarming landowners gains from the sps are only 4 however there is a large variation in the capitalization rate for different sps levels and between different member states 3 to 94

the effect of agricultural policy on farmland values the extent to which agricultural support programs have been capitalized into farmland prices has been examined in this study a present value land price model was developed which decomposes returns to the land base into its two possible sources farm production and government subsidies and allows the discount rates associated with these two income sources to vary the empirical results indicate that government payments are discounted less than marketbased returns in ontario thus government payments have been viewed as a more stable source of income to ontario farm operators during the last half century than market based returns

decision bias in the newsvendor problem with a known demand distribution experimental evidence in the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand if too much is ordered stock is left over at the end of the period whereas if too little is ordered sales are lost the expected profit maximizing order quantity is well known but little is known about how managers actually make these decisions we describe two experiments that investigate newsvendor decisions across different profit conditions results from these studies demonstrate that choices systematically deviate from those that maximize expected profit subjects order too few of high profit products and too many of low profit products these results are not consistent with risk aversion risk seeking preferences prospect theory preferences waste aversion stockout aversion or the consequences of underestimating opportunity costs two explanations are consistent with the data one subjects behave as if their utility function incorporates a preference to reduce ex post inventory error the absolute difference between the chosen quantity and realized demand two subjects suffer from the anchoring and insufficient adjustment bias feedback and training did not mitigate inventory order errors we suggest techniques to improve decision making

the impact of decoupled payments on farm choices conceptual and methodological challenges abstract in this paper we review the methodological framework for analysing decoupled payments in models of agricultural production market and technological uncertainty farm efficiency credit constraints farm household choices involving extra agricultural decisions policy uncertainty and long run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis future research should refine the analysis of decoupled payments mainly trying to provide results that can be useful for policy simulation to bridge the gap between analysis at the individual level and sector policy models

trips and the international public health controversies issues and challenges the aim of this article is to contribute to an evaluation of the meaning and practical effects of the trade related intellectual property rights trips agreement on public health issues section 2 presents the situation that prevailed for intellectual property ip protection in the pharmaceutical industry before the signing of the trips in both developed countries and developing countries dcs section 3 is devoted to a presentation of the key changes that have taken place at the legal level with the signing of the trips providing an opportunity to highlight the way in which trips has disrupted the existing situation by generating a series of serious tensions notably in the relations between north and south countries section 4 is devoted to the new challenges posed by the post 2005 scenario 2005 being the end of the transition period granted dcs to comply with the trips requirements section 5 focusing on the brazilian anti aids program tries to illustrate how the post 2005 scene has narrowed the margins for efficient action against the aids pandemics and put the brazilian national public health program under strain copyright 2006 oxford university press

auditing the producer price index micro evidence from prescription pharmaceutical preparations from january 1984 through december 1989 the bureau of labor statistics bls price index for prescription pharmaceuticals grew at 9 09 per year using bls type laspeyres index procedures with monthly price and quantity data on all prescription pharmaceuticals sold by four u s pharmaceutical manufacturers accounting for 24 of industry domestic sales we find that the four company index increases at 6 68 per year when we employ a divisia price index with smoothed weights incorporating new goods the index grows 6 03 per year why does the bls index grow 50 more rapidly than the divisia index that mystery is the focal point of our article

the political economy of the pharmaceutical industry e conomicsis a practical science since its inception as an independent discipline it has probed the major policy issues of the day the topics that aroused the interests of its practitioners have generally been those that presented government officials with critical choices the modern literature on the economics of the pharmaceutical industry is no exception this body of material originated with the investigations of the kefauver committee in late 1959 public interest was aroused by the spectacle of confrontation between committee and industry the record made by this committee and its successors grew to tens of thousands of pages as claims and counterclaims were offered regarding industry conduct and performance the primary line of attack concerned pharmaceutical prices and profits the committee demonstrated that prices generally exceeded direct costs of manufacturing for 22 major pharmaceutical firms in 1958 costs of goods sold were merely 32 percent of total sales u s senate report 1961 p 31 the committee argued that this fact alone demonstrated the presence of monopoly power while the substantial difference between revenues and production costs permitted high expenditures on research and development it also paid for even higher selling outlays moreover reported rates of return after taxes during this period on the order of 21 to 22 percent exceeded twice the average for all manufacturing the industry replied that on the contrary prices were low relative to the value afforded consumers and high returns on successful products were required to balance the losses from the large numbers of unsuccessful ones the relevant concept of marginal costs according to the industry position must include the costs of developing and marketing new products and therefore prices were not excessive at all although it admitted earning substantial profits the industry argued that without these returns research outlays would be limited and the number of new drugs reduced the committee countered that little of social value arose from industry research molecules were manipulated and the new drugs that resulted were therapeutically similar to those already on the market indeed it suggested that much