Designing Competition in Health Care Markets

In this paper we propose a simple, market based mechanism to set prices in health care markets, namely a system where the patients are auctioned out to the hospitals. Our aim is to characterize principles as to how such an auction should be designed. In the case of elective treatment, health authorities thus organize a competition between hospitals. The hospital with the lowest price signs a contracts with authority (or the insurer) that commits him to treat a given number of patients within a predetermined period. However, this is not a simple mechanism that identi…es the hospital with the lowest treatment cost. Due to potentially rapid and unpredictable shifts in demand, treatment capacity may be hard to know in advance. There is always a risk that treatment must be canceled due to arrival of patients that require acute treatment. This calls for a market design that accounts for the risk of default. Our main result is that the expected cost for the government is reduced if the government chooses to ”subsidize” default. This could be thought of as a system in which the government buys treatment in the spot market in the case of default, and let the hospital pay a default fee that is lower than the spot price. The reason why this reduces expected costs for the government is that the e¤ect on the bids is asymmetric: The second lowest bid is on average reduced more than the winning bid. Hence, the winner’s profit tends to shrink. This is due to what we characterize an endogenous correlation. Since the cost of treatment increases in the default risk (as the hospital must pay a penalty if it defaults), high cost hospitals typically have larger default risks than low costs hospitals.Health care markets; health care; hospitals; competition

Fixing Nonconvergence of Algebraic Iterative Reconstruction with an Unmatched Backprojector

We consider algebraic iterative reconstruction methods with applications in image reconstruction. In particular, we are concerned with methods based on an unmatched projector/backprojector pair; i.e., the backprojector is not the exact adjoint or transpose of the forward projector. Such situations are common in large-scale computed tomography, and we consider the common situation where the method does not converge due to the nonsymmetry of the iteration matrix. We propose a modified algorithm that incorporates a small shift parameter, and we give the conditions that guarantee convergence of this method to a fixed point of a slightly perturbed problem. We also give perturbation bounds for this fixed point. Moreover, we discuss how to use Krylov subspace methods to efficiently estimate the leftmost eigenvalue of a certain matrix to select a proper shift parameter. The modified algorithm is illustrated with test problems from computed tomography

In cylinder visualization of stratified combustion of E85 and main sources of soot formation

The combustion process and soot formation in spark ignited spray guided stratified combustion of E85 was investigated in a single cylinder optical engine with direct injection of fuel using an outward opening piezo actuated injector. The effect of engine rotation frequency, fuel quantity, injection sequence and ignition timing was studied. Combustion, soot formation and soot oxidation was analyzed using cylinder pressure measurements, images recorded using high speed video cameras, the flame emission spectrum and OH^∗ chemiluminescence and soot incandescence imaging. A maximum injection duration was found to exist for direct ignition of the fuel spray. Engine rotation frequency had little effect on the initial and maximum rate of combustion. The maximum rate of combustion decreased with increasing cycle fuel mass when a single injection was used. The rate of combustion and indicated mean effective pressure increased and the combustion variability decreased when the single injection was split into multiple injections in close succession to deliver the same total fuel mass and the last fuel spray was ignited. Ignition of the first fuel spray resulted in a more pronounced change. The absence of soot incandescence during the initial flame propagation suggested flame propagation in a partially mixed fuel and air mixture with stoichiometric to fuel lean regions. A single fuel injection resulted in piston pool fires due to fuel spray impingement on the piston and was the primary source of soot formation. The pool fires persisted until after conditions favorable to oxidation of the soot had ended. Soot formation in the gas phase occurred while favorable soot oxidation conditions existed and was efficiently oxidized. The magnitude of the piston pool fires was reduced using multiple injections. The reduction is attributed to a reduction of the fuel spray penetration length and a smaller effective injection orifice area, resulting in a shorter total duration of fuel spray impingement on the piston crown. Soot formation occurred primarily in the gas phase when the first of two fuel sprays was ignited and persisted due to the second fuel spray entering an existing flame leading to fuel rich combustion

Politicians and soft budget constraints

We study soft budget constraints from the perspective of political economics. A partly partisan government confronts a budget crisis in a politically important sector, e.g. like the health care sector. To what extent the government wants to make additional grants to the sector depends on economic conditions and on the preferences of the government, both unknown to the electorate. Thus, the government’s budget response gives a signal of its preferences, and may thereby influence the probability that the government is re-elected. As a result, the handeling of a budget crisis becomes inefficient even from an ex post point of view, in the sense that it does not react adequately to changing economic conditions.Political economics; budget constraints; budget crisis

Public Ownership as a Signalling Device

We study public ownership from the perspective of political economics. A partly partisan government runs a state-owned firm. The number of employees the government wants to hire depends both on economic conditions and on the preferences of the government, both unknown to the electorate. The government's policy towards the state-owned firm gives a signal of its preferences, and may thereby influence the probability that the government is re-elected. As a result, the governance of the firm becomes inefficient and static, in the sense that it does not react adequately to changing economic conditions.

All pay auctions with certain and uncertain prizes - a comment

In the important contribution "All pay auctions with certain and uncertain prizes" published in Games and Economic Behavior May 2014, Minchuk and and Sela analyze an all pay auction with multiple prizes. The specific feature of the model is that all valuations are common except for the valuation of one of the prizes, for which contestants have private valuations. However, the equilibrium characterization derived in the paper is incorrect. This note derives the correct equilibrium of the model