Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.

Trade Costs, Quality, and The Skill Premium

We develop a monopolistic competition model with nonhomothetic factor input bundles where increasing quality requires increasing use of skilled workers. As a result more skill abundant countries export higher quality, higher priced goods. Using a multicountry dataset we test and confirm the findings in Schott (2004) of a positive effect of skill abundance on unit values identified with US data. We extend the core model with per unit trade costs leading to the Washington-apples effect that goods shipped over larger distance are of higher quality. The combination of high-quality goods being relatively skill intensive with the Washington-apples effect implies that countries at a larger distance from their trading partners display a higher skill premium. Simulating our model we find that a doubling of distance of a country relative to all its trading partners raises the skill premium in a country by about 2.3 percent.

Vascular hospitalization rates and costs in patients with peripheral artery disease in the United States

BACKGROUND: Peripheral artery disease (PAD) is common and imposes a high risk of major systemic and limb ischemic events. The REduction of Atherothrombosis for Continued Health (REACH) Registry is an international prospective registry of patients at risk of atherothrombosis caused by established arterial disease or the presence of 3 atherothrombotic risk factors. METHODS AND RESULTS: We compared the 2-year rates of vascular-related hospitalizations and associated costs in US patients with established PAD across patient subgroups. Symptomatic PAD at enrollment was identified on the basis of current intermittent claudication with an ankle-brachial index (ABI) <0.90 or a history of lower-limb revascularization or amputation. Asymptomatic PAD was diagnosed on the basis of an enrollment ABI <0.90 in the absence of symptoms. Overall, 25 763 of the total 68 236-patient REACH cohort were enrolled from US sites; 2396 (9.3%) had symptomatic and 213 (0.8%) had asymptomatic PAD at baseline. One- and cumulative 2-year follow-up data were available for 2137 (82%) and 1677 (64%) of US REACH patients with either symptomatic or asymptomatic PAD, respectively. At 2 years, mean cumulative hospitalization costs, per patient, were $7445, $7000, $10 430, and $11 693 for patients with asymptomatic PAD, a history of claudication, lower-limb amputation, and revascularization, respectively (P=0.007). A history of peripheral intervention (lower-limb revascularization or amputation) was associated with higher rates of subsequent procedures at both 1 and 2 years. CONCLUSIONS: The economic burden of PAD is high. Recurring hospitalizations and repeat revascularization procedures suggest that neither patients, physicians, nor healthcare systems should assume that a first admission for a lower-extremity PAD procedure serves as a permanent resolution of this costly and debilitating condition.

Reliability, construct and criterion validity of the KIDSCREEN-10 score: a short measure for children and adolescents' well-being and health-related quality of life

Background To assess the criterion and construct validity of the KIDSCREEN-10 well-being and health-related quality of life (HRQoL) score, a short version of the KIDSCREEN-52 and KIDSCREEN-27 instruments. Methods The child self-report and parent report versions of the KIDSCREEN-10 were tested in a sample of 22,830 European children and adolescents aged 8–18 and their parents (n = 16,237). Correlation with the KIDSCREEN-52 and associations with other generic HRQoL measures, physical and mental health, and socioeconomic status were examined. Score differences by age, gender, and country were investigated. Results Correlations between the 10-item KIDSCREEN score and KIDSCREEN-52 scales ranged from r = 0.24 to 0.72 (r = 0.27–0.72) for the self-report version (proxy-report version). Coefficients below r = 0.5 were observed for the KIDSCREEN-52 dimensions Financial Resources and Being Bullied only. Cronbach alpha was 0.82 (0.78), test–retest reliability was ICC = 0.70 (0.67) for the self- (proxy-)report version. Correlations between other children self-completed HRQoL questionnaires and KIDSCREEN-10 ranged from r = 0.43 to r = 0.63 for the KIDSCREEN children self-report and r = 0.22–0.40 for the KIDSCREEN parent proxy report. Known group differences in HRQoL between physically/mentally healthy and ill children were observed in the KIDSCREEN-10 self and proxy scores. Associations with self-reported psychosomatic complaints were r = −0.52 (−0.36) for the KIDSCREEN-10 self-report (proxy-report). Statistically significant differences in KIDSCREEN-10 self and proxy scores were found by socioeconomic status, age, and gender. Conclusions Our results indicate that the KIDSCREEN-10 provides a valid measure of a general HRQoL factor in children and adolescents, but the instrument does not represent well most of the single dimensions of the original KIDSCREEN-52. Test–retest reliability was slightly below a priori defined thresholds.

Optimising care in a Swiss University Emergency Department by implementing a multicentre trauma register (TARN): report on evaluation, costs and benefits of trauma registries

Diagnostic and therapeutic approaches to trauma patients are, depending on experience, equipment and different therapeutic doctrines, subject to wide variations. The ability to compare trauma centres using a standardised trauma register helps to reveal unresolved systemic issues and simplifies the quality management in an Emergency Department (ED).

Immune Activation Reduces Sperm Quality in the Great Tit

Mounting an immune response against pathogens incurs costs to organisms by its effects on important life-history traits, such as reproductive investment and survival. As shown recently, immune activation produces large amounts of reactive species and is suggested to induce oxidative stress. Sperm are highly susceptible to oxidative stress, which can negatively impact sperm function and ultimately male fertilizing efficiency. Here we address the question as to whether mounting an immune response affects sperm quality through the damaging effects of oxidative stress. It has been demonstrated recently in birds that carotenoid-based ornaments can be reliable signals of a male's ability to protect sperm from oxidative damage. In a full-factorial design, we immune-challenged great tit males while simultaneously increasing their vitamin E availability, and assessed the effect on sperm quality and oxidative damage. We conducted this experiment in a natural population and tested the males' response to the experimental treatment in relation to their carotenoid-based breast coloration, a condition-dependent trait. Immune activation induced a steeper decline in sperm swimming velocity, thus highlighting the potential costs of an induced immune response on sperm competitive ability and fertilizing efficiency. We found sperm oxidative damage to be negatively correlated with sperm swimming velocity. However, blood resistance to a free-radical attack (a measure of somatic antioxidant capacity) as well as plasma and sperm levels of oxidative damage (lipid peroxidation) remained unaffected, thus suggesting that the observed effect did not arise through oxidative stress. Towards the end of their breeding cycle, swimming velocity of sperm of more intensely colored males was higher, which has important implications for the evolution of mate choice and multiple mating in females because females may accrue both direct and indirect benefits by mating with males having better quality sperm.

Pilot study on the comprehensive economic costs of major trauma: Consequential costs are well in excess of medical costs

BACKGROUND: Trauma care is expensive. However, reliable data on the exact lifelong costs incurred by a major trauma patient are lacking. Discussion usually focuses on direct medical costs--underestimating consequential costs resulting from absence from work and permanent disability. METHODS: Direct medical costs and consequential costs of 63 major trauma survivors (ISS >13) at a Swiss trauma center from 1995 to 1996 were assessed 5 years posttrauma. The following cost evaluation methods were used: correction cost method (direct cost of restoring an original state), human capital method (indirect cost of lost productivity), contingent valuation method (human cost as the lost quality of life), and macroeconomic estimates. RESULTS: Mean ISS (Injury Severity Score) was 26.8 +/- 9.5 (mean +/- SD). In all, 22 patients (35%) were disabled, causing discounted average lifelong total costs of USD 1,293,800, compared with 41 patients (65%) who recovered without any disabilities with incurred costs of USD 147,200 (average of both groups USD 547,800). Two thirds of these costs were attributable to a loss of production whereas only one third was a result of the cost of correction. Primary hospital treatment (USD 27,800 +/- 37,800) was only a minor fraction of the total cost--less than the estimated cost of police and the judiciary. Loss of quality of life led to considerable intangible human costs similar to real costs. CONCLUSIONS: Trauma costs are commonly underestimated. Direct medical costs make up only a small part of the total costs. Consequential costs, such as lost productivity, are well in excess of the usual medical costs. Mere cost averages give a false estimate of the costs incurred by patients with/without disabilities.

Impact of Helicobacter pylori eradication on dyspepsia, health resource use, and quality of life in the Bristol helicobacter project: randomised controlled trial

OBJECTIVE: To determine the impact of a community based Helicobacter pylori screening and eradication programme on the incidence of dyspepsia, resource use, and quality of life, including a cost consequences analysis. DESIGN: H pylori screening programme followed by randomised placebo controlled trial of eradication. SETTING: Seven general practices in southwest England. PARTICIPANTS: 10,537 unselected people aged 20-59 years were screened for H pylori infection (13C urea breath test); 1558 of the 1636 participants who tested positive were randomised to H pylori eradication treatment or placebo, and 1539 (99%) were followed up for two years. INTERVENTION: Ranitidine bismuth citrate 400 mg and clarithromycin 500 mg twice daily for two weeks or placebo. MAIN OUTCOME MEASURES: Primary care consultation rates for dyspepsia (defined as epigastric pain) two years after randomisation, with secondary outcomes of dyspepsia symptoms, resource use, NHS costs, and quality of life. RESULTS: In the eradication group, 35% fewer participants consulted for dyspepsia over two years compared with the placebo group (55/787 v 78/771; odds ratio 0.65, 95% confidence interval 0.46 to 0.94; P = 0.021; number needed to treat 30) and 29% fewer participants had regular symptoms (odds ratio 0.71, 0.56 to 0.90; P = 0.05). NHS costs were 84.70 pounds sterling (74.90 pounds sterling to 93.91 pounds sterling) greater per participant in the eradication group over two years, of which 83.40 pounds sterling (146 dollars; 121 euro) was the cost of eradication treatment. No difference in quality of life existed between the two groups. CONCLUSIONS: Community screening and eradication of H pylori is feasible in the general population and led to significant reductions in the number of people who consulted for dyspepsia and had symptoms two years after treatment. These benefits have to be balanced against the costs of eradication treatment, so a targeted eradication strategy in dyspeptic patients may be preferable.

Complementary and alternative medicine costs - a systematic literature review

Objective: The aim of this literature review, performed within the framework of the Swiss governmental Program of Evaluation of Complementary Medicine (PEK), was to investigate costs of complementary and alternative medicine (CAM). Materials and Methods: A systematic literature search was conducted in 11 electronic databases. All retrieved titles and reference lists were also hand-searched. Results: 38 publications were found: 23 on CAM of various definitions (medical and non-medical practitioners, over-the-counter products), 13 on homeopathy, 2 on phytotherapy. Studies investigated different kinds of costs (direct or indirect) and used different methods (prospective or retrospective questionnaires, data analyses, cost-effectiveness models). Most studies report 'out of pocket' costs, because CAM is usually not covered by health insurance. Costs per CAM-treatment / patient / month were AUD 7-66, CAD 250 and GBP 13.62 +/- 1.61. Costs per treatment were EUR 205 (range: 15-1,278), USD 414 +/- 269 and USD 1,127. In two analyses phytotherapy proved to be cost-effective. One study revealed a reduction of 1.5 days of absenteeism from work in the CAM group compared to conventionally treated patients. Another study, performed by a health insurance company reported a slight increase in direct costs for CAM. Costs for CAM covered by insurance companies amounted to approximately 0.2-0.5% of the total healthcare budget (Switzerland, 2003). Publications had several limitations, e.g. efficacy of therapies was rarely reported. As compared to conventional patients, CAM patients tend to cause lower costs. Conclusion: Results suggest lower costs for CAM than for conventional patients, but the limited methodological quality lowers the significance of the available data. Further well-designed studies and models are required.

The KIDSCREEN-27 quality of life measure for children and adolescents: psychometric results from a cross-cultural survey in 13 European countries

OBJECTIVE: To assess the construct and criterion validity of the KIDSCREEN-27 health-related quality of life (HRQoL) questionnaire, a shorter version of the KIDSCREEN-52. METHODS: The five-dimensional KIDSCREEN-27 was tested in a sample of 22,827. For criterion validity the correlation with and the percentage explained variance of the scores of the KIDSCREEN-52 instrument were examined. Construct validity was assessed by testing a priori expected associations with other generic HRQoL measures (YQOL-S, PedsQL, CHIP), indicators of physical and mental health, and socioeconomic status. Age and gender differences were investigated. RESULTS: Correlation with corresponding scales of the KIDSCREEN-52 ranged from r = 0.63 to r = 0.96, and r2 ranged from 0.39 to 0.92. Correlations between other HRQoL questionnaires and KIDSCREEN-27 dimensions were moderate to high for those assessing similar constructs (r = 0.36 to 0.63). Statistically significant and sizeable differences between physically and mentally healthy and ill children were found in all KIDSCREEN-27 dimensions together with strong associations with psychosomatic complaints (r = -0.52). Most of the KIDSCREEN-27 dimensions showed a gradient according to socio-economic status, age and gender. CONCLUSIONS: The KIDSCREEN-27 seems to be a valid measure of HRQoL in children and adolescents. Further research is needed to assess longitudinal validity and sensitivity to change.

Testing the structural and cross-cultural validity of the KIDSCREEN-27 quality of life questionnaire

OBJECTIVES: The aim of this study is to assess the structural and cross-cultural validity of the KIDSCREEN-27 questionnaire. METHODS: The 27-item version of the KIDSCREEN instrument was derived from a longer 52-item version and was administered to young people aged 8-18 years in 13 European countries in a cross-sectional survey. Structural and cross-cultural validity were tested using multitrait multi-item analysis, exploratory and confirmatory factor analysis, and Rasch analyses. Zumbo's logistic regression method was applied to assess differential item functioning (DIF) across countries. Reliability was assessed using Cronbach's alpha. RESULTS: Responses were obtained from n = 22,827 respondents (response rate 68.9%). For the combined sample from all countries, exploratory factor analysis with procrustean rotations revealed a five-factor structure which explained 56.9% of the variance. Confirmatory factor analysis indicated an acceptable model fit (RMSEA = 0.068, CFI = 0.960). The unidimensionality of all dimensions was confirmed (INFIT: 0.81-1.15). Differential item functioning (DIF) results across the 13 countries showed that 5 items presented uniform DIF whereas 10 displayed non-uniform DIF. Reliability was acceptable (Cronbach's alpha = 0.78-0.84 for individual dimensions). CONCLUSIONS: There was substantial evidence for the cross-cultural equivalence of the KIDSCREEN-27 across the countries studied and the factor structure was highly replicable in individual countries. Further research is needed to correct scores based on DIF results. The KIDSCREEN-27 is a new short and promising tool for use in clinical and epidemiological studies.

Effects of a comprehensive rehabilitation program on quality of life in patients with chronic heart failure

This evaluation was performed to assess the effects of a new, comprehensive outpatient rehabilitation program on generic and disease-specific quality of life related to exercise tolerance in stable chronic heart failure patients. Fifty-one patients (aged 59+/-11 years; 84% men) were treated for 12 weeks. Patients underwent optimized drug treatment, exercise training, and counseling and education. At baseline and at the end of the program, functional status, exercise capacity, and quality of life were assessed using the Medical Outcomes Study 36-item Short-Form Health Survey and the Minnesota Living with Heart Failure Questionnaire. Left ventricular ejection fraction and New York Heart Association functional class, as well as measures of physical fitness and walking distance covered in 6 minutes, improved significantly (by 11%-20% and by 58% on average, respectively). Physical functioning (effect size, 0.38; p<0.0001), role functioning (effect size, 0.17; p<0.05), and mental component score (effect size, 0.47; p<0.0001) on the questionnaire improved significantly. Disease-specific quality of life improved in sum score (effect size, 0.24; p<0.0001) and physical component score (effect size, 0.35; p<0.0001). The latter was inversely correlated to improvement in peak power output (r= -0.31; p<0.05). In patients with stable chronic heart failure, significant improvements in both generic and disease-specific quality of life related to improved exercise tolerance can be achieved within 12 weeks of comprehensive rehabilitation.

Traffic-Adaptive and Link-Quality-Aware Communication in Wireless Sensor Networks

This paper is a summary of the main contribu- tions of the PhD thesis published in [1]. The main research contributions of the thesis are driven by the research question how to design simple, yet efficient and robust run-time adaptive resource allocation schemes within the commu- nication stack of Wireless Sensor Network (WSN) nodes. The thesis addresses several problem domains with con- tributions on different layers of the WSN communication stack. The main contributions can be summarized as follows: First, a a novel run-time adaptive MAC protocol is intro- duced, which stepwise allocates the power-hungry radio interface in an on-demand manner when the encountered traffic load requires it. Second, the thesis outlines a metho- dology for robust, reliable and accurate software-based energy-estimation, which is calculated at network run- time on the sensor node itself. Third, the thesis evaluates several Forward Error Correction (FEC) strategies to adap- tively allocate the correctional power of Error Correcting Codes (ECCs) to cope with timely and spatially variable bit error rates. Fourth, in the context of TCP-based communi- cations in WSNs, the thesis evaluates distributed caching and local retransmission strategies to overcome the perfor- mance degrading effects of packet corruption and trans- mission failures when transmitting data over multiple hops. The performance of all developed protocols are eval- uated on a self-developed real-world WSN testbed and achieve superior performance over selected existing ap- proaches, especially where traffic load and channel condi- tions are suspect to rapid variations over time.

A Routing Protocol Based on Energy and Link Quality for Internet of Things Applications

The Internet of Things (IoT) is attracting considerable attention from the universities, industries, citizens and governments for applications, such as healthcare, environmental monitoring and smart buildings. IoT enables network connectivity between smart devices at all times, everywhere, and about everything. In this context, Wireless Sensor Networks (WSNs) play an important role in increasing the ubiquity of networks with smart devices that are low-cost and easy to deploy. However, sensor nodes are restricted in terms of energy, processing and memory. Additionally, low-power radios are very sensitive to noise, interference and multipath distortions. In this context, this article proposes a routing protocol based on Routing by Energy and Link quality (REL) for IoT applications. To increase reliability and energy-efficiency, REL selects routes on the basis of a proposed end-to-end link quality estimator mechanism, residual energy and hop count. Furthermore, REL proposes an event-driven mechanism to provide load balancing and avoid the premature energy depletion of nodes/networks. Performance evaluations were carried out using simulation and testbed experiments to show the impact and benefits of REL in small and large-scale networks. The results show that REL increases the network lifetime and services availability, as well as the quality of service of IoT applications. It also provides an even distribution of scarce network resources and reduces the packet loss rate, compared with the performance of well-known protocols.

Benefits and challenges in practice-oriented psychotherapy research in Germany: The TK and the QS-PSY-BAY projects of quality assurance in outpatient psychotherapy

Objective: Two patient-focused long-term research projects performed in the German outpatient psychotherapy system are focused on in this article. The TK (Techniker Krankenkasse) project is the first study to evaluate a quality assurance and feedback system with regard to its practical feasibility in German routine care. The other study (“Quality Assurance in Outpatient Psychotherapy in Bavaria”; QS-PSY-BAY) was designed to test a new approach for quality assurance in outpatient psychotherapy using electronic documentation of patient characteristics and outcome parameters. In addition this project provides the opportunity to analyze data on health-related costs for the patients undergoing outpatient psychotherapy. Method: Both projects and their results indicating high effect sizes are briefly described. Results: From the perspectives of the research teams, advisory boards and other stakeholders, the experiences with these projects are discussed focusing on obstacles, challenges, difficulties, and benefits in developing and implementing the studies. The triangle collaboration of therapists, researchers, and health insurance companies/health service institutions turned out to be fruitful in both studies. Conclusions: Despite some controversies between the partners the experiences indicate the importance of practiced-research collaborations to provide relevant information about the delivery of outpatient psychotherapy in the health system