Fixed wages and bonuses in agency contracts: the case of a continuous state space

In this paper, we extend the state-contingent production approach to principal–agent problems to the case where the state space is an atomless continuum. The approach is modelled on the treatment of optimal tax problems. The central observation is that, under reasonable conditions, the optimal contract may involve a fixed wage with a bonus for above-normal performance. This is analogous to the phenomenon of "bunching" at the bottom in the optimal tax literature.

Constructing internationally comparable real income aggregates by combining sparse benchmark data with annual national accounts data: A state-space approach

The importance of availability of comparable real income aggregates and their components to applied economic research is highlighted by the popularity of the Penn World Tables. Any methodology designed to achieve such a task requires the combination of data from several sources. The first is purchasing power parities (PPP) data available from the International Comparisons Project roughly every five years since the 1970s. The second is national level data on a range of variables that explain the behaviour of the ratio of PPP to market exchange rates. The final source of data is the national accounts publications of different countries which include estimates of gross domestic product and various price deflators. In this paper we present a method to construct a consistent panel of comparable real incomes by specifying the problem in state-space form. We present our completed work as well as briefly indicate our work in progress.

Estimating trends and seasonality in coronary heart disease

We present two methods of estimating the trend, seasonality and noise in time series of coronary heart disease events. In contrast to previous work we use a non-linear trend, allow multiple seasonal components, and carefully examine the residuals from the fitted model. We show the importance of estimating these three aspects of the observed data to aid insight of the underlying process, although our major focus is on the seasonal components. For one method we allow the seasonal effects to vary over time and show how this helps the understanding of the association between coronary heart disease and varying temperature patterns. Copyright (C) 2004 John Wiley Sons, Ltd.

Subgeometric rates of convergence for a class of continuous-time Markov process

Let (Phi(t))(t is an element of R+) be a Harris ergodic continuous-time Markov process on a general state space, with invariant probability measure pi. We investigate the rates of convergence of the transition function P-t(x, (.)) to pi; specifically, we find conditions under which r(t) vertical bar vertical bar P-t (x, (.)) - pi vertical bar vertical bar -> 0 as t -> infinity, for suitable subgeometric rate functions r(t), where vertical bar vertical bar - vertical bar vertical bar denotes the usual total variation norm for a signed measure. We derive sufficient conditions for the convergence to hold, in terms of the existence of suitable points on which the first hitting time moments are bounded. In particular, for stochastically ordered Markov processes, explicit bounds on subgeometric rates of convergence are obtained. These results are illustrated in several examples.

Why Scotland needs more than just a new migration policy

The Scottish Executive has adopted a policy to combat Scotland's declining population by encouraging inward migration. Using a multi-state population model this paper presents nine long-term population scenarios for Scotland using three net international migration levels and three fertility paths. The results show inward migration can slow population decline but makes little difference to population ageing. Without a higher fertility rate Scotland's population will become demographically unsustainable. Our simulations show that a higher fertility rate substantially reduces the future ageing.

Existence and uniqueness of Q-processes with a given finite μ-invariant measure

Let Q be a stable and conservative Q-matrix over a countable state space S consisting of an irreducible class C and a single absorbing state 0 that is accessible from C. Suppose that Q admits a finite mu-subinvariant measure in on C. We derive necessary and sufficient conditions for there to exist a Q-process for which m is mu-invariant on C, as well as a necessary condition for the uniqueness of such a process.

Population pharmacokinetics and association between A77 1726 plasma concentrations and disease activity measures following administration of leflunomide to people with rheumatoid arthritis

Aims To investigate the concentration-effect relationship and pharmacokinetics of leflunomide in patients with rheumatoid arthritis (RA). Methods Data were collected from 23 RA patients on leflunomide therapy (as sole disease modifying antirheumatic drug (DMARD)) for at least 3 months. Main measures were A77 1726 (active metabolite of leflunomide) plasma concentrations and disease activity measures including pain, duration/intensity of morning stiffness, and SF-36 survey. A population estimate was sought for apparent clearance (CL/F ) and volume of distribution was fixed (0.155 l kg(-1)). Factors screened for influence on CL/F were weight, age, gender and estimated creatinine clearance. Results Significantly higher A77 1726 concentrations were seen in patients with less swollen joints and with higher SF-36 mental summary scores than in those with measures indicating more active disease (P < 0.05); concentration-effect trends were seen with five other disease activity measures. Statistical analysis of all disease activity measures showed that mean A77 1726 concentrations in groups with greater control of disease activity were significantly higher than those in whom the measures indicated less desirable control (P < 0.05). There was large between subject variability in the dose-concentration relationship. A steady-state infusion model best described the pharmacokinetic data. Inclusion of age as a covariate decreased interindividual variability (P < 0.01), but this would not be clinically important in terms of dosage changes. Final parameter estimate (% CV interindividual variability) for CL/F was 0.0184 l h(-1) (50%) (95% CI 0.0146, 0.0222). Residual (unexplained) variability (% CV) was 8.5%. Conclusions This study of leflunomide in patients using the drug clinically indicated a concentration-effect relationship. From our data, a plasma A77 1726 concentration of 50 mg l(-1) is more likely to indicate someone with less active disease than is a concentration around 30 mg l(-1). The marked variability in pharmacokinetics suggests a place for individualized dosing of leflunomide in RA therapy.

Optimization of co-current spray drying process of sugar-rich foods. Part I - Moisture and glass transition temperature profile during drying

A steady state mathematical model for co-current spray drying was developed for sugar-rich foods with the application of the glass transition temperature concept. Maltodextrin-sucrose solution was used as a sugar-rich food model. The model included mass, heat and momentum balances for a single droplet drying as well as temperature and humidity profile of the drying medium. A log-normal volume distribution of the droplets was generated at the exit of the rotary atomizer. This generation created a certain number of bins to form a system of non-linear first-order differential equations as a function of the axial distance of the drying chamber. The model was used to calculate the changes of droplet diameter, density, temperature, moisture content and velocity in association with the change of air properties along the axial distance. The difference between the outlet air temperature and the glass transition temperature of the final products (AT) was considered as an indicator of stickiness of the particles in spray drying process. The calculated and experimental AT values were close, indicating successful validation of the model. (c) 2004 Elsevier Ltd. All rights reserved.

Output price subsidies in a stochastic world

This article studies the comparative statics of output subsidies for firms, with monotonic preferences over costs and returns, that face price and production uncertainty. The modeling of deficiency payments, support-price schemes, and stochastic supply shifts in a state-space framework is discussed. It is shown how these notions can be used, via a simple application of Shephard's lemma, to analyze input-demand shifts once comparative-static results for supply are available. A range of comparative-static results for supply are then developed and discussed.

ICICLE: A semantic-based retrieval system for WWW images

In this paper, we present ICICLE (Image ChainNet and Incremental Clustering Engine), a prototype system that we have developed to efficiently and effectively retrieve WWW images based on image semantics. ICICLE has two distinguishing features. First, it employs a novel image representation model called Weight ChainNet to capture the semantics of the image content. A new formula, called list space model, for computing semantic similarities is also introduced. Second, to speed up retrieval, ICICLE employs an incremental clustering mechanism, ICC (Incremental Clustering on ChainNet), to cluster images with similar semantics into the same partition. Each cluster has a summary representative and all clusters' representatives are further summarized into a balanced and full binary tree structure. We conducted an extensive performance study to evaluate ICICLE. Compared with some recently proposed methods, our results show that ICICLE provides better recall and precision. Our clustering technique ICC facilitates speedy retrieval of images without sacrificing recall and precision significantly.

A diffusion approach to approximating preservation probabilities for gene duplicates

Consider a haploid population and, within its genome, a gene whose presence is vital for the survival of any individual. Each copy of this gene is subject to mutations which destroy its function. Suppose one member of the population somehow acquires a duplicate copy of the gene, where the duplicate is fully linked to the original gene's locus. Preservation is said to occur if eventually the entire population consists of individuals descended from this one which initially carried the duplicate. The system is modelled by a finite state-space Markov process which in turn is approximated by a diffusion process, whence an explicit expression for the probability of preservation is derived. The event of preservation can be compared to the fixation of a selectively neutral gene variant initially present in a single individual, the probability of which is the reciprocal of the population size. For very weak mutation, this and the probability of preservation are equal, while as mutation becomes stronger, the preservation probability tends to double this reciprocal. This is in excellent agreement with simulation studies.

Distillability of Werner states using entanglement witnesses and robust semidefinite programs

We use robust semidefinite programs and entanglement witnesses to study the distillability of Werner states. We perform exact numerical calculations that show two-undistillability in a region of the state space, which was previously conjectured to be undistillable. We also introduce bases that yield interesting expressions for the distillability witnesses and for a tensor product of Werner states with an arbitrary number of copies.

Anisotropy-based robust performance analysis of finite horizon linear discrete time varying systems

We consider a problem of robust performance analysis of linear discrete time varying systems on a bounded time interval. The system is represented in the state-space form. It is driven by a random input disturbance with imprecisely known probability distribution; this distributional uncertainty is described in terms of entropy. The worst-case performance of the system is quantified by its a-anisotropic norm. Computing the anisotropic norm is reduced to solving a set of difference Riccati and Lyapunov equations and a special form equation.