Economists' perceptions versus managers' decisions:an experiment in transaction cost analysis

Are the perceptions of professional economists on transaction costs consistent with make-or-buy decisions made within firms? The answer may have important implications for transaction cost research. Data on firms' outsourcing during the new product development process are taken from a largescale survey of UK, German and Irish manufacturing plants, and we test the consistency of these outsourcing decisions with the predictions derived from the transaction cost perceptions of a panel of economists. Little consistency is evident between actual outsourcing patterns and the predictions of the (Williamsonian) transactions cost model derived from the panel of economists. There is, however, evidence of a systematic pattern to the differences, suggesting that a competence or resource-based approach may be relevant to understanding firm outsourcing, and that firms are adopting a strategic approach to managing their external relationships. © Cambridge Political Economy Society 2005; all rights reserved.

Accommodating energy price volatility in life cycle cost analysis of asphalt pavements

Energy price is related to more than half of the total life cycle cost of asphalt pavements. Furthermore, the fluctuation related to price of energy has been much higher than the general inflation and interest rate. This makes the energy price inflation an important variable that should be addressed when performing life cycle cost (LCC) studies re- garding asphalt pavements. The present value of future costs is highly sensitive to the selected discount rate. Therefore, the choice of the discount rate is the most critical element in LCC analysis during the life time of a project. The objective of the paper is to present a discount rate for asphalt pavement projects as a function of interest rate, general inflation and energy price inflation. The discount rate is defined based on the portion of the energy related costs during the life time of the pavement. Consequently, it can reflect the financial risks related to the energy price in asphalt pavement projects. It is suggested that a discount rate sensitivity analysis for asphalt pavements in Sweden should range between –20 and 30%.

Transaction cost analysis

Transaction cost theory is one of the most widely used theories in marketing, management, and economics. The focus of the theory is on explaining how firms organize transactions. The rules by which transactions are organized is called governance. A wide variety of strategic decisions of firms, such as outsourcing, the mode of organizing exports, the use of crowdsourcing, or partner selection efforts, can be analyzed and understood using transaction cost theory. The basic argument of transaction cost theory is that firms economize on costs by choosing a form of governance that minimizes production and transaction costs. We discuss the origins and uses of the theory, critical variables, assumptions, and limitations.

Costing police custody operations

Presents a simulation study of the costing of police custody operations at a UK police force. The custody operation incorporates the arrest, booking-in, interview, detention and court appearance activities. The Activity Based Costing (ABC) approach is used as a framework to show how costs are generated by the three “drivers” of cost, activity and resource. These relate to the design efficiency of the process, the timing and mix of demand on the process and the cost of resources used to undertake the process respectively. The use of discrete-event simulation allows the incorporation of dynamic (time-dependent) and stochastic (variability) elements in the cost analysis. This enables both the amount and timing of the use of capacity and the generation of cost to be established. The concept of committed and flexible resources directs management decisions to the redeployment of unused capacity or alternatively the identification of additional capacity requirements.

Remote sensing applications to flood hydrology in Belize

The research compares the usefullness of four remote sensing information sources, these being LANDSAT photographic prints, LANDSAT computer compatible tapes, Metric Camera and SIR-A photographic prints. These sources provide evaluations of the catchment characteristics of the Belize and Sibun river basins in Central America. Map evaluations at 1:250,000 scale are compared to the results of the same scale, remotely sensed information sources. The values of catchment characteristics for both maps and LANDSAT prints are used in multiple regression analysis, providing flood flow formulae, after investigations to provide a suitable dependent variable discharge series are made for short term records. The use of all remotely sensed information sources in providing evaluations of catchment characteristics is discussed. LANDSAT prints and computer compatible tapes of a post flood scene are used to estimate flood distributions and volumes. These are compared to values obtained from unit hydrograph analysis, using the dependent discharge series and evaluate the probable losses from the Belize river to the floodplain, thereby assessing the accuracy of LANDSAT estimates. Information relating to flood behaviour is discussed in terms of basic image presentation as well as image processing. A cost analysis of the purchase and use of all materials is provided. Conclusions of the research indicate that LANDSAT print material may provide information suitable for regression analysis at levels of accuracy as great as those of topographic maps, that the differing information sources are uniquely applicable and that accurate estimates of flood volumes may be determined even by post flood imagery.

Degree of vertical integration and its buffering effects on political uncertainty

The focus of this study is on the governance decisions in a concurrent channels context, in the case of uncertainty. The study examines how a firm chooses to deploy its sales force in times of uncertainty, and the subsequent performance outcome of those deployment choices. The theoretical framework is based on multiple theories of governance, including transaction cost analysis (TCA), agency theory, and institutional economics. Three uncertainty variables are investigated in this study. The first two are demand and competitive uncertainty which are considered to be industry-level market uncertainty forms. The third uncertainty, political uncertainty, is chosen as it is an important dimension of institutional environments, capturing non-economic circumstances such as regulations and political systemic issues. The study employs longitudinal secondary data from a Thai hotel chain, comprising monthly observations from January 2007 – December 2012. This hotel chain has its operations in 4 countries, Thailand, the Philippines, United Arab Emirates – Dubai, and Egypt, all of which experienced substantial demand, competitive, and political uncertainty during the study period. This makes them ideal contexts for this study. Two econometric models, both deploying Newey-West estimations, are employed to test 13 hypotheses. The first model considers the relationship between uncertainty and governance. The second model is a version of Newey-West, using an Instrumental Variables (IV) estimator and a Two-Stage Least Squares model (2SLS), to test the direct effect of uncertainty on performance and the moderating effect of governance on the relationship between uncertainty and performance. The observed relationship between uncertainty and governance observed follows a core prediction of TCA; that vertical integration is the preferred choice of governance when uncertainty rises. As for the subsequent performance outcomes, the results corroborate that uncertainty has a negative effect on performance. Importantly, the findings show that becoming more vertically integrated cannot help moderate the effect of demand and competitive uncertainty, but can significantly moderate the effect of political uncertainty. These findings have significant theoretical and practical implications, and extend our knowledge of the impact on uncertainty significantly, as well as bringing an institutional perspective to TCA. Further, they offer managers novel insight into the nature of different types of uncertainty, their impact on performance, and how channel decisions can mitigate these impacts.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

By engaging in trade and foreign direct investment (FDI) with foreign partners, a country can access the R&D and related knowledge stocks of other countries (by accident or by design) and so benefit from those stocks of knowledge at a cost lower than that which would be incurred by developing the knowledge internally. This should lead to beneficial ‘spillover’ effects on the productivity of domestic firms. However, the literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the size of these effects varies depending on the technological and labour cost differentials between the UK and its trading partners. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored. We also find that absorptive capacity matters for spillovers from FDI, but not from trade. Overall, these findings suggest that the productivity effects of FDI are largely restricted to plants with high absorptive capacity, while the productivity effects of imports occur largely among higher-technology plants regardless of their absorptive capacity.

Targets and self monitoring in hypertension: randomised controlled trial and cost effectiveness analysis

OBJECTIVES: To assess whether blood pressure control in primary care could be improved with the use of patient held targets and self monitoring in a practice setting, and to assess the impact of these on health behaviours, anxiety, prescribed antihypertensive drugs, patients' preferences, and costs. DESIGN: Randomised controlled trial. SETTING: Eight general practices in south Birmingham. PARTICIPANTS: 441 people receiving treatment in primary care for hypertension but not controlled below the target of < 140/85 mm Hg. INTERVENTIONS: Patients in the intervention group received treatment targets along with facilities to measure their own blood pressure at their general practice; they were also asked to visit their general practitioner or practice nurse if their blood pressure was repeatedly above the target level. Patients in the control group received usual care (blood pressure monitoring by their practice). MAIN OUTCOME MEASURES: Primary outcome: change in systolic blood pressure at six months and one year in both intervention and control groups. Secondary outcomes: change in health behaviours, anxiety, prescribed antihypertensive drugs, patients' preferences of method of blood pressure monitoring, and costs. RESULTS: 400 (91%) patients attended follow up at one year. Systolic blood pressure in the intervention group had significantly reduced after six months (mean difference 4.3 mm Hg (95% confidence interval 0.8 mm Hg to 7.9 mm Hg)) but not after one year (mean difference 2.7 mm Hg (- 1.2 mm Hg to 6.6 mm Hg)). No overall difference was found in diastolic blood pressure, anxiety, health behaviours, or number of prescribed drugs. Patients who self monitored lost more weight than controls (as evidenced by a drop in body mass index), rated self monitoring above monitoring by a doctor or nurse, and consulted less often. Overall, self monitoring did not cost significantly more than usual care (251 pounds sterling (437 dollars; 364 euros) (95% confidence interval 233 pounds sterling to 275 pounds sterling) versus 240 pounds sterling (217 pounds sterling to 263 pounds sterling). CONCLUSIONS: Practice based self monitoring resulted in small but significant improvements of blood pressure at six months, which were not sustained after a year. Self monitoring was well received by patients, anxiety did not increase, and there was no appreciable additional cost. Practice based self monitoring is feasible and results in blood pressure control that is similar to that in usual care.

Cost and performance analysis of new wood-fuelled power plant concepts

The objective of the thesis was to analyse several process configurations for the production of electricity from biomass. Process simulation models using AspenPlus aimed at calculating the industrial performance of power plant concepts were built, tested, and used for analysis. The criteria used in analysis were performance and cost. All of the advanced systems appear to have higher efficiencies than the commercial reference, the Rankine cycle. However, advanced systems typically have a higher cost of electricity (COE) than the Rankine power plant. High efficiencies do not reduce fuel costs enough to compensate for the high capital costs of advanced concepts. The successful reduction of capital costs would appear to be the key to the introduction of the new systems. Capital costs account for a considerable, often dominant, part of the cost of electricity in these concepts. All of the systems have higher specific investment costs than the conventional industrial alternative, i.e. the Rankine power plant; Combined beat and power production (CUP) is currently the only industrial area of application in which bio-power costs can be considerably reduced to make them competitive. Based on the results of this work, AsperiPlus is an appropriate simulation platform. How-ever, the usefulness of the models could be improved if a number of unit operations were modelled in greater detail. The dryer, gasifier, fast pyrolysis, gas engine and gas turbine models could be improved.

Rural road accidents in Iran: analysis, comparison and the cost

In the general introduction of the road-accident phenomenon inside and outside Iran, the results of previous research-works and international conferences and seminars on road-safety have been reviewed. Also a sample-road between Tehran and Mashad has been investigated as a case-study. Examining the road-accident data and iriformation,first: the information presented in road-accident report-forms in developed countries is discussed and, second: the procedures for road-accident data collection in Iran are investigated in detail. The data supplied by Iran Road-Police Central Statistics Office, is analysed, different rates are computed, due comparisons with other nations are made, and the results are discussed. Also such analysis and comparisons are presented for different provinces of Iran. It is concluded that each province with its own natural, geographical, social and economical characteristics possesses its own reasons for the quality and quantity of road-accidents and therefore must receive its own appropriate remedial solutions. The question~ of "what is the cost of road-accidents", "why and how evaluate the cost", "what is the appropriate way of approach to such evaluation" are all discussed and then "the cost of road-accidents in Iran" based on two different approaches: "Gross National Output"and "court award" is computed. It is concluded that this cost is about 1.5 per cent of the country's national product. In Appendix 3 an impressive example is given of the trend of costs and benefits that can be attributed to investment in road-safety measures.

A fuzzy levelised energy cost method for renewable energy technology assessment

Renewable energy project development is highly complex and success is by no means guaranteed. Decisions are often made with approximate or uncertain information yet the current methods employed by decision-makers do not necessarily accommodate this. Levelised energy costs (LEC) are one such commonly applied measure utilised within the energy industry to assess the viability of potential projects and inform policy. The research proposes a method for achieving this by enhancing the traditional discounting LEC measure with fuzzy set theory. Furthermore, the research develops the fuzzy LEC (F-LEC) methodology to incorporate the cost of financing a project from debt and equity sources. Applied to an example bioenergy project, the research demonstrates the benefit of incorporating fuzziness for project viability, optimal capital structure and key variable sensitivity analysis decision-making. The proposed method contributes by incorporating uncertain and approximate information to the widely utilised LEC measure and by being applicable to a wide range of energy project viability decisions. © 2013 Elsevier Ltd. All rights reserved.

Risk-benefit and cost-effectiveness assessments of the statins

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The benefit of combining standard automated perimetry and multifocal visual evoked potential hemifield intersector analysis in suspecious glaucomatous visual field defects

Several analysis protocols have been tested to identify early visual field losses in glaucoma patients using the mfVEP technique, some were successful in detection of field defects, which were comparable to the standard SAP visual field assessment, and others were not very informative and needed more adjustment and research work. In this study we implemented a novel analysis approach and evaluated its validity and whether it could be used effectively for early detection of visual field defects in glaucoma. The purpose of this study is to examine the benefit of adding mfVEP hemifield Intersector analysis protocol to the standard HFA test when there is suspicious glaucomatous visual field loss. 3 groups were tested in this study; normal controls (38 eyes), glaucoma patients (36 eyes) and glaucoma suspect patients (38 eyes). All subjects had a two standard Humphrey visual field HFA test 24-2, optical coherence tomography of the optic nerve head, and a single mfVEP test undertaken in one session. Analysis of the mfVEP results was done using the new analysis protocol; the Hemifield Sector Analysis HSA protocol. The retinal nerve fibre (RNFL) thickness was recorded to identify subjects with suspicious RNFL loss. The hemifield Intersector analysis of mfVEP results showed that signal to noise ratio (SNR) difference between superior and inferior hemifields was statistically significant between the 3 groups (ANOVA p<0.001 with a 95% CI). The difference between superior and inferior hemispheres in all subjects were all statistically significant in the glaucoma patient group 11/11 sectors (t-test p<0.001), partially significant 5/11 in glaucoma suspect group (t-test p<0.01) and no statistical difference between most sectors in normal group (only 1/11 was significant) (t-test p<0.9). Sensitivity and specificity of the HSA protocol in detecting glaucoma was 97% and 86% respectively, while for glaucoma suspect were 89% and 79%. The use of SAP and mfVEP results in subjects with suspicious glaucomatous visual field defects, identified by low RNFL thickness, is beneficial in confirming early visual field defects. The new HSA protocol used in the mfVEP testing can be used to detect glaucomatous visual field defects in both glaucoma and glaucoma suspect patient. Using this protocol in addition to SAP analysis can provide information about focal visual field differences across the horizontal midline, and confirm suspicious field defects. Sensitivity and specificity of the mfVEP test showed very promising results and correlated with other anatomical changes in glaucoma field loss. The Intersector analysis protocol can detect early field changes not detected by standard HFA test.