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on Contract Theory and Applications |
| By: | David Bardey; Philippe De Donder; César Mantilla |
| Abstract: | We develop a theoretical analysis of two widely used regulations of genetic tests, disclosure duty and consent law, and we run several experiments in order to shed light on both the take-up rate of genetic testing and on the comparison of policy-holders’ welfare under the two regulations. Disclosure Duty forces individuals to reveal their test results to their insurers, exposing them to the risk of having to pay a large premium in case they are discovered to have a high probability of developing a disease (a discrimination risk). Differently, Consent Law allows them to hide this detrimental information, creating asymmetric information and adverse selection. We obtain that the take-up rate of the genetic test is low under Disclosure Duty, larger and increasing with adverse selection under Consent Law. Also, the fraction of individuals who are prefer Disclosure Duty to Consent Law increases with the amount of adverse selection under the latter. These results are obtained for exogenous values of adverse selection under Consent Law, and the repeated interactions experiment devised has not resulted in convergence towards an equilibrium level of adverse selection. |
| Keywords: | disclosure duty, consent law, discrimination risk, informational value of test, personalized medicine, experiment. |
| JEL: | D82 I18 C91 |
| Date: | 2014–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:012341&r=cta |
| By: | Armstrong, Mark; Zhou, Jidong |
| Abstract: | This paper studies sales techniques which discourage consumer search by making it harder or more expensive to return to buy after a search for alternatives. It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer when all do so. When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative, and in many cases the outcome is as if the seller could only make an exploding offer. Search deterrence results in sub-optimal matching of products to consumers and often raises the price consumers pay. |
| Keywords: | Consumer search, price discrimination, sequential screening, exploding offers, sales techniques |
| JEL: | D18 D43 D82 D83 D86 L13 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60891&r=cta |
| By: | Danilov, Anastasia (University of Cologne); Harbring, Christine (RWTH Aachen University); Irlenbusch, Bernd (University of Cologne) |
| Abstract: | We study, how help can be fostered under relative rewards by means of team bonus and corporate value statements. A simple model analysis suggests that team members help less as relative rewards increase. As one potential measure to encourage help, we augment relative rewards with team rewards determined by the output of the whole team. This theoretical benchmark is tested in an experiment. Furthermore, we provide the first clean one-shot experimental test of the Lazear and Rosen (1981) tournament model. In a second experiment, we investigate the effectiveness of corporate value statements to encourage help. |
| Keywords: | help, relative rewards, team incentives, corporate value statements, experiment |
| JEL: | M52 J33 J41 L23 C72 C91 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8707&r=cta |
| By: | Ivaldi, Marc; Petrova, Milena; Urdanoz, Miguel |
| Abstract: | Motivated by the higher price sensitivity and service homogenisation in the airline industry in recent years, we propose a new methodology to deal with transaction prices and to estimate the effect of alliances in the US domestic market. The assumption that airlines compete on price allows us to take advantage of the observational equivalence between Bertrand competition and the reverse English auction. We then apply an MLE method, developed by Paarsch (1997) for esti- mating auctions, to recover the distributional characteristics of air fares using a sample of airline tickets from the US domestic market. This procedure allows us to benefit from the heterogeneity of individual prices while most studies have used average prices, which would have involved a loss of information and a potential bias. We find that an alliance operating in a market is associated with prices on average 18.9 percent higher. Additionally, we find the standard deviation of ticket prices to be 4.3 percent higher, which is likely related to more efficient revenue management practice by alliance partners operating together in the same market. |
| Keywords: | airlines, alliances, airfares. |
| JEL: | L40 L93 R48 |
| Date: | 2014–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:28861&r=cta |
| By: | Gino Gancia (CREI) |
| Abstract: | Globalization is rapidly changing economic borders and yet political borders change only slowly. In this paper we study the nature and consequences of this growing mismatch. We show that globalization requires a political structure that redistributes power away from the centralized jurisdictions or states and towards a new set of overlapping jurisdictions that are both larger and smaller than existing states. Our theory suggests that globalization provides a simple yet powerful explanation for the rise of large nation-states followed by the creation of international authorities (such as the EU) together with a process of political fragmentation within states. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:644&r=cta |