Optimal public rationing and price response

We study optimal public rationing of an indivisible good and private sector price responses. Consumers differ in their wealth and costs of provisions. Due to a limited budget, some consumers must be rationed. Public rationing determines the characteristics of consumers who seek supply from the private sector, where a firm sets prices based on consumers' cost information and in response to the rationing rule. We consider two information regimes. In the first, the public supplier rations consumers according to their wealth information. In equilibrium, the public supplier must ration both rich and poor consumers. Supplying all poor consumers would leave only rich consumers in the private market, and the firm would react by setting a high price. Rationing some poor consumers is optimal, and implements price reduction in the private market. In the second information regime, the public supplier rations consumers according to consumers' wealth and cost information. In equilibrium, consumers are allocated the good if and only if their costs are below a threshold. Wealth information is not used. Rationing based on cost results in higher equilibrium total consumer surplus than rationing based on wealth. [Authors]

Endogenous Credit Cycles and Financial Dampening in an Adverse Selection Economy

We propose an adverse selection framework in which the financial sector has a dual role. It amplifies or dampens exogenous shocks and also generates endogenous fluctuations. We fully characterize constrained optimal contracts in a setting in which entrepreneurs need to borrow and are privately informed about the quality of their projects. Our characterization is novel in analyzing pooling and separating allocations in a context of multi-dimensional screening: specifically, the amounts of investment undertaken and of entrepreneurial net worth are used to screen projects. We then embed these results in a dynamic competitive economy. First, we show how endogenous regime switches in financial contracts may generate fluctuations in an economy that exhibits no dynamics under full information. Unlike previous models of endogenous cycles, our result does not rely on entrepreneurial net worth being counter-cyclical or inconsequential for determining investment. Secondly, the model shows the different implications of adverse selection as opposed to pure moral hazard. In particular, and contrary to standard results in the macroeconomic literature, the financial system may dampen exogenous shocks in the presence of adverse selection.

The impotence of price controls: failed attempts to constrain pharmaceutical expenditures in Greece.

BACKGROUND: While the prices of pharmaceuticals are relatively low in Greece, expenditure on them is growing more rapidly than almost anywhere else in the European Union. OBJECTIVE: To describe and explain the rise in drug expenditures through decomposition of the increase into the contribution of changes in prices, in volumes and a product-mix effect. METHODS: The decomposition of the growth in pharmaceutical expenditures in Greece over the period 1991-2006 was conducted using data from the largest social insurance fund (IKA) that covers more than 50% of the population. RESULTS: Real drug spending increased by 285%, despite a 58% decrease in the relative price of pharmaceuticals. The increase in expenditure is mainly attributable to a switch to more innovative, but more expensive, pharmaceuticals, indicated by a product-mix residual of 493% in the decomposition. A rising volume of drugs also plays a role, and this is due to an increase in the number of prescriptions issued per doctor visit, rather than an increase in the number of visits or the population size. CONCLUSIONS: Rising pharmaceutical expenditures are strongly determined by physicians' prescribing behaviour, which is not subject to any monitoring and for which there are no incentives to be cost conscious.

Tools and techniques to study ligand-receptor interactions and receptor activation by TNF superfamily members.

Ligands and receptors of the TNF superfamily are therapeutically relevant targets in a wide range of human diseases. This chapter describes assays based on ELISA, immunoprecipitation, FACS, and reporter cell lines to monitor interactions of tagged receptors and ligands in both soluble and membrane-bound forms using unified detection techniques. A reporter cell assay that is sensitive to ligand oligomerization can identify ligands with high probability of being active on endogenous receptors. Several assays are also suitable to measure the activity of agonist or antagonist antibodies, or to detect interactions with proteoglycans. Finally, self-interaction of membrane-bound receptors can be evidenced using a FRET-based assay. This panel of methods provides a large degree of flexibility to address questions related to the specificity, activation, or inhibition of TNF-TNF receptor interactions in independent assay systems, but does not substitute for further tests in physiologically relevant conditions.

Three essays in control, entrepreneurship and innovation

One of the key emphases of these three essays is to provide practical managerial insight. However, good practical insight, can only be created by grounding it firmly on theoretical and empirical research. Practical experience-based understanding without theoretical grounding remains tacit and cannot be easily disseminated. Theoretical understanding without links to real life remains sterile. My studies aim to increase the understanding of how radical innovation could be generated at large established firms and how it can have an impact on business performance as most businesses pursue innovation with one prime objective: value creation. My studies focus on large established firms with sales revenue exceeding USD $ 1 billion. Usually large established firms cannot rely on informal ways of management, as these firms tend to be multinational businesses operating with subsidiaries, offices, or production facilities in more than one country. I. Internal and External Determinants of Corporate Venture Capital Investment The goal of this chapter is to focus on CVC as one of the mechanisms available for established firms to source new ideas that can be exploited. We explore the internal and external determinants under which established firms engage in CVC to source new knowledge through investment in startups. We attempt to make scholars and managers aware of the forces that influence CVC activity by providing findings and insights to facilitate the strategic management of CVC. There are research opportunities to further understand the CVC phenomenon. Why do companies engage in CVC? What motivates them to continue "playing the game" and keep their active CVC investment status. The study examines CVC investment activity, and the importance of understanding the influential factors that make a firm decide to engage in CVC. The main question is: How do established firms' CVC programs adapt to changing internal conditions and external environments. Adaptation typically involves learning from exploratory endeavors, which enable companies to transform the ways they compete (Guth & Ginsberg, 1990). Our study extends the current stream of research on CVC. It aims to contribute to the literature by providing an extensive comparison of internal and external determinants leading to CVC investment activity. To our knowledge, this is the first study to examine the influence of internal and external determinants on CVC activity throughout specific expansion and contraction periods determined by structural breaks occurring between 1985 to 2008. Our econometric analysis indicates a strong and significant positive association between CVC activity and R&D, cash flow availability and environmental financial market conditions, as well as a significant negative association between sales growth and the decision to engage into CVC. The analysis of this study reveals that CVC investment is highly volatile, as demonstrated by dramatic fluctuations in CVC investment activity over the past decades. When analyzing the overall cyclical CVC period from 1985 to 2008 the results of our study suggest that CVC activity has a pattern influenced by financial factors such as the level of R&D, free cash flow, lack of sales growth, and external conditions of the economy, with the NASDAQ price index as the most significant variable influencing CVC during this period. II. Contribution of CVC and its Interaction with R&D to Value Creation The second essay takes into account the demands of corporate executives and shareholders regarding business performance and value creation justifications for investments in innovation. Billions of dollars are invested in CVC and R&D. However there is little evidence that CVC and its interaction with R&D create value. Firms operating in dynamic business sectors seek to innovate to create the value demanded by changing market conditions, consumer preferences, and competitive offerings. Consequently, firms operating in such business sectors put a premium on finding new, sustainable and competitive value propositions. CVC and R&D can help them in this challenge. Dushnitsky and Lenox (2006) presented evidence that CVC investment is associated with value creation. However, studies have shown that the most innovative firms do not necessarily benefit from innovation. For instance Oyon (2007) indicated that between 1995 and 2005 the most innovative automotive companies did not obtain adequate rewards for shareholders. The interaction between CVC and R&D has generated much debate in the CVC literature. Some researchers see them as substitutes suggesting that firms have to choose between CVC and R&D (Hellmann, 2002), while others expect them to be complementary (Chesbrough & Tucci, 2004). This study explores the interaction that CVC and R&D have on value creation. This essay examines the impact of CVC and R&D on value creation over sixteen years across six business sectors and different geographical regions. Our findings suggest that the effect of CVC and its interaction with R&D on value creation is positive and significant. In dynamic business sectors technologies rapidly relinquish obsolete, consequently firms operating in such business sectors need to continuously develop new sources of value creation (Eisenhardt & Martin, 2000; Qualls, Olshavsky, & Michaels, 1981). We conclude that in order to impact value creation, firms operating in business sectors such as Engineering & Business Services, and Information Communication & Technology ought to consider CVC as a vital element of their innovation strategy. Moreover, regarding the CVC and R&D interaction effect, our findings suggest that R&D and CVC are complementary to value creation hence firms in certain business sectors can be better off supporting both R&D and CVC simultaneously to increase the probability of generating value creation. III. MCS and Organizational Structures for Radical Innovation Incremental innovation is necessary for continuous improvement but it does not provide a sustainable permanent source of competitiveness (Cooper, 2003). On the other hand, radical innovation pursuing new technologies and new market frontiers can generate new platforms for growth providing firms with competitive advantages and high economic margin rents (Duchesneau et al., 1979; Markides & Geroski, 2005; O'Connor & DeMartino, 2006; Utterback, 1994). Interestingly, not all companies distinguish between incremental and radical innovation, and more importantly firms that manage innovation through a one-sizefits- all process can almost guarantee a sub-optimization of certain systems and resources (Davila et al., 2006). Moreover, we conducted research on the utilization of MCS along with radical innovation and flexible organizational structures as these have been associated with firm growth (Cooper, 2003; Davila & Foster, 2005, 2007; Markides & Geroski, 2005; O'Connor & DeMartino, 2006). Davila et al. (2009) identified research opportunities for innovation management and provided a list of pending issues: How do companies manage the process of radical and incremental innovation? What are the performance measures companies use to manage radical ideas and how do they select them? The fundamental objective of this paper is to address the following research question: What are the processes, MCS, and organizational structures for generating radical innovation? Moreover, in recent years, research on innovation management has been conducted mainly at either the firm level (Birkinshaw, Hamel, & Mol, 2008a) or at the project level examining appropriate management techniques associated with high levels of uncertainty (Burgelman & Sayles, 1988; Dougherty & Heller, 1994; Jelinek & Schoonhoven, 1993; Kanter, North, Bernstein, & Williamson, 1990; Leifer et al., 2000). Therefore, we embarked on a novel process-related research framework to observe the process stages, MCS, and organizational structures that can generate radical innovation. This article is based on a case study at Alcan Engineered Products, a division of a multinational company provider of lightweight material solutions. Our observations suggest that incremental and radical innovation should be managed through different processes, MCS and organizational structures that ought to be activated and adapted contingent to the type of innovation that is being pursued (i.e. incremental or radical innovation). More importantly, we conclude that radical can be generated in a systematic way through enablers such as processes, MCS, and organizational structures. This is in line with the findings of Jelinek and Schoonhoven (1993) and Davila et al. (2006; 2007) who show that innovative firms have institutionalized mechanisms, arguing that radical innovation cannot occur in an organic environment where flexibility and consensus are the main managerial mechanisms. They rather argue that radical innovation requires a clear organizational structure and formal MCS.

IROme, a New High-Throughput Molecular Tool for the Diagnosis of Inherited Retinal Dystrophies-A Price Comparison with Sanger Sequencing.

The molecular diagnosis of retinal dystrophies (RD) is difficult because of genetic and clinical heterogeneity. Previously, the molecular screening of genes was done one by one, sometimes in a scheme based on the frequency of sequence variants and the number of exons/length of the candidate genes. Payment for these procedures was complicated and the sequential billing of several genes created endless paperwork. We therefore evaluated the costs of generating and sequencing a hybridization-based DNA library enriched for the 64 most frequently mutated genes in RD, called IROme, and compared them to the costs of amplifying and sequencing these genes by the Sanger method. The production cost generated by the high-throughput (HT) sequencing of IROme was established at CHF 2,875.75 per case. Sanger sequencing of the same exons cost CHF 69,399.02. Turnaround time of the analysis was 3 days for IROme. For Sanger sequencing, it could only be estimated, as we never sequenced all 64 genes in one single patient. Sale cost for IROme calculated on the basis of the sale cost of one exon by Sanger sequencing is CHF 8,445.88, which corresponds to the sale price of 40 exons. In conclusion, IROme is cheaper and faster than Sanger sequencing and therefore represents a sound approach for the diagnosis of RD, both scientifically and economically. As a drop in the costs of HT sequencing is anticipated, target resequencing might become the new gold standard in the molecular diagnosis of RD.

Endogenous angiotensinergic system in neurons of rat and human trigeminal ganglia.

To clarify the role of Angiotensin II (Ang II) in the sensory system and especially in the trigeminal ganglia, we studied the expression of angiotensinogen (Ang-N)-, renin-, angiotensin converting enzyme (ACE)- and cathepsin D-mRNA, and the presence of Ang II and substance P in the rat and human trigeminal ganglia. The rat trigeminal ganglia expressed substantial amounts of Ang-N- and ACE mRNA as determined by quantitative real time PCR. Renin mRNA was untraceable in rat samples. Cathepsin D was detected in the rat trigeminal ganglia indicating the possibility of existence of pathways alternative to renin for Ang I formation. In situ hybridization in rat trigeminal ganglia revealed expression of Ang-N mRNA in the cytoplasm of numerous neurons. By using immunocytochemistry, a number of neurons and their processes in both the rat and human trigeminal ganglia were stained for Ang II. Post in situ hybridization immunocytochemistry reveals that in the rat trigeminal ganglia some, but not all Ang-N mRNA-positive neurons marked for Ang II. In some neurons Substance P was found colocalized with Ang II. Angiotensins from rat trigeminal ganglia were quantitated by radioimmunoassay with and without prior separation by high performance liquid chromatography. Immunoreactive angiotensin II (ir-Ang II) was consistently present and the sum of true Ang II (1-8) octapeptide and its specifically measured metabolites were found to account for it. Radioimmunological and immunocytochemical evidence of ir-Ang II in neuronal tissue is compatible with Ang II as a neurotransmitter. In conclusion, these results suggest that Ang II could be produced locally in the neurons of rat trigeminal ganglia. The localization and colocalization of neuronal Ang II with Substance P in the trigeminal ganglia neurons may be the basis for a participation and function of Ang II in the regulation of nociception and migraine pathology.

Oil price shocks, income and democracy

We examine the effect of oil price fluctuations ondemocratic institutions over the 1960-2007 period. We also exploitthe very persistent response of income to oil price fluctuations tostudy the effect of persistent (oil price-driven) income shocks ondemocracy. Our results indicate that countries with greater net oilexports over GDP see improvements in democratic institutionsfollowing upturns in international oil prices. We estimate that a 1percentage point increase in per capita GDP growth due to apositive oil price shock increases the Polity democracy score byaround 0.2 percentage points on impact and by around 2 percentagepoints in the long run. The effect on the probability of a democratictransition is around 0.4 percentage points.

Endogenous spillovers, increased competition and re-organization waves

We consider an entrepreneur that is the sole producer of a costreducing skill, but the entrepreneur that hires a team to usethe skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We showthat there are two types of diffusion avoiding strategies forthe entrepreneur to preempt collusive communication i) settingup a large productive capacity (the traditional firm) and ii)keeping a small team (the lean firm). The traditional firm ischaracterized by its many "marginal" employees that work shortdays, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees,engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costsare low and when the sector is immature.

Endogenous credit cycles

I develop an overlapping-generations framework in which changes in lending standards generateendogenous cycles. In my economy, entrepreneurs who are privately informed about thequality of their projects need to borrow funds. Intermediaries screen entrepreneurs both throughthe amount of investment undertaken and through the level of entrepreneurial net worth.I show that endogenous regime switches in financial contracts from pooling to separatingand vice-versa may generate fluctuations even in the absence of exogenous shocks. Whenthe economy is in the pooling (separating) regime, lending standards seem lax ( tight ) andinvestment is high (low). Differently from the existing literature, my model does not requireentrepreneurial net worth to be counter cyclycal or inconsequential for determining aggregateinvestment.

Consistent solutions in exchange economies: A characterization of the price mechanism

We characterize the Walrasian allocations correspondence by means offour axioms: consistency, replica invariance, individual rationality andPareto optimality. It is shown that for any given class of exchange economiesany solution that satisfies the axioms is a selection from the Walrasianallocations with slack. Preferences are assumed to be smooth, but may besatiated and non--convex. A class of economies is defined as all economieswhose agents' preferences belong to an arbitrary family (finite or infinite)of types. The result can be modified to characterize equal budget Walrasianallocations with slack by replacing individual rationality with individualrationality from equal division. The results are valid also for classes ofeconomies in which core--Walras equivalence does not hold.