Product risk sharing by warranties in a monopoly market with risk-averse consumers

1998 ◽  
Vol 33 (2) ◽  
pp. 241-257 ◽  
Author(s):  
Anette Boom
Keyword(s):  
Risk Sharing ◽  
Risk Averse ◽  
Monopoly Market ◽  
Product Risk

Creation and Regulation of Bank Liquidity

2019 ◽  
pp. 180-226 ◽  
Author(s):  
Christa H. S. Bouwman
Keyword(s):  
Risk Sharing ◽  
Capital Requirements ◽  
Empirical Literature ◽  
Shadow Banking ◽  
Basel Iii ◽  
Risk Averse ◽  
Funding Liquidity ◽  
Open Research ◽  
Core Function ◽  
Research Questions

Liquidity creation is a core function of banks and an important economic service to the economy. This chapter discusses two distinct notions of bank liquidity creation developed in the theoretical literature—funding liquidity creation and improved risk sharing for risk-averse depositors. It also examines the empirical literature on bank liquidity creation. The focus is on the economics of bank liquidity creation, both in the traditional relationship banking context and in the shadow-banking context. This chapter discusses related prudential regulation issues, pertaining mainly to capital requirements and liquidity requirements, as well. It provides a historical overview, starting in the early 1800s and ending with Basel III and the Dodd–Frank Act. It identifies open research questions regarding both capital requirements and liquidity requirements.

scholarly journals Compatibility of Advanced Power Generation Technologies With the Independent Power Production

1998 ◽  
Author(s):  
Miro R. Susta ◽  
Peter Luby
Keyword(s):  
Power Generation ◽  
Risk Sharing ◽  
Risk Evaluation ◽  
New Technologies ◽  
Power Production ◽  
Risk Averse ◽  
Performance Parameters ◽  
Factors Affecting ◽  
Nominal Performance ◽  
Modern Technologies

Traditional philosophy of power producing state-owned utilities has been effected by their anonymous risk-sharing attitude. They needn’t have bothered too much with brand-new technologies. Technological risk with unproved, although excellent nominal performance machinery was born by the end-users. On the other hand, independent power producers’ (IPP) philosophy is a little bit different. Their attitude is much more effected by risk evaluation. They have pretty good reasons to be risk-averse with technologies lacking a proven operational record. Any failure to obey their contractual liabilities could mean dramatic consequences to them. Consequently, old-fashioned players in the power generation industry may seem to have been pushing industry technical progress more effectively ahead than it would be with modem players - IPPs. But this is only one side of the coin. Quite opposite reasons for IPPs’ affinity to modern technologies are higher performance parameters which offer better revenues to them, more flexible choice of fuel and prompt readiness to react sensitively to market imbalance and volatilities. Obviously, a hardly-defined, yet sensible equilibrium under which both these trends coexist and inter-act here exists. In this paper we shall analyse factors affecting such equilibrium by presenting real examples of gas turbine-dependent power generation technologies.

Negotiated Transfer Pricing and Divisional vs. Firm-Wide Performance Evaluation

1999 ◽  
Vol 74 (1) ◽  
pp. 87-104 ◽  
Author(s):  
Regina M. Anctil ◽  
Sunil Dutta
Keyword(s):  
Risk Sharing ◽  
Transfer Pricing ◽  
Linear Functions ◽  
Managerial Compensation ◽  
Risk Averse ◽  
Compensation Contracts ◽  
Optimal Contracts ◽  
Total Surplus ◽  
Specific Investments ◽  
Optimal Linear

A firm with two divisions, each run by a risk-averse manager, contracts with the two managers to operate their divisions and possibly engage in interdivisional trade. Each division can increase the total surplus generated through interdivisional trade by making costly relationship-specific investments. The terms of trade are determined through negotiations between the two managers. Managerial compensation contracts are linear functions of divisional profit and firm-wide profit. If managers are compensated solely on the basis of their divisional profits, they invest less than the first-best amounts. While compensation contracts based on firm-wide profits alone can induce first-best investments, they impose extra risk on risk-averse managers. Therefore, we find that optimal linear compensation contracts will contain both divisional and firm-wide components. Our analysis also identifies a feature of negotiated transfer pricing, namely interdivisional risk sharing, and characterizes its impact on the design of optimal contracts.

scholarly journals Fair Utilitarianism

2021 ◽  
Vol 13 (2) ◽  
pp. 370-401
Author(s):  
Marc Fleurbaey ◽  
Stéphane Zuber
Keyword(s):  
Health Policy ◽  
Risk Aversion ◽  
Risk Sharing ◽  
Risk Averse ◽  
Collective Risk ◽  
Poor Population

Utilitarianism plays a central role in economics, but there is a gap between theory, where utilitarianism is dominant, and applications, where monetary criteria are often used. For applications, a key difficulty is to define how utilities should be measured and compared. Drawing on Harsanyi’s (1955) approach, we introduce a new normalization of utilities ensuring that: (i) a transfer from a rich population to a poor population is welfare enhancing, and (ii) populations with more risk-averse people have lower welfare. We study some implications of this “fair utilitarianism” for risk sharing, collective risk aversion, and the design of health policy. (JEL D63, D81)

Monitoring and Subcontracting Arrangement with a Collusive Supervisor

1995 ◽  
Vol 10 (2) ◽  
pp. 235-259 ◽  
Author(s):  
John J. Cheh ◽  
Tae-Young Paik
Keyword(s):  
Performance Evaluation ◽  
Risk Aversion ◽  
Risk Premium ◽  
Risk Sharing ◽  
Limited Liability ◽  
Risk Averse ◽  
Direct Control ◽  
Evaluation Scheme ◽  
Incentive Problem ◽  
Reservation Utility

This paper investigates the optimal performance evaluation scheme of a supervisor who monitors a worker in a setting where the worker can collude with the supervisor. We study the setting where the supervisor's incentive problem results from collusion, not from work aversion. In the owner-supervisor-worker structure, the supervisor monitors the worker's effort and reports to the owner. The owner evaluates the worker based on the supervisor's report and imposes less risk on the worker, saving the risk premium to him. To prevent collusion between the supervisor and the worker, the owner must hold the supervisor responsible for the worker's performance, paying risk premium to the supervisor. Examples show that the owner prefers the owner-supervisor-worker structure to the owner-worker structure when the worker is very risk averse relative to the supervisor. Examples also show that if the supervisor and the worker can make side transfers for risk sharing as well as for collusion, the owner might prefer the owner-supervisor-worker structure only when the supervisor's risk aversion is neither too great nor too small. When the supervisor is close to risk neutral, either his limited liability or high reservation utility makes it too costly to hire him. The subcontracting structure where the supervisor is delegated to contract with the worker is shown to be performance equivalent to the owner-supervisor-worker structure. In the subcontracting, the supervisor's direct control on the worker's compensation plays the same role that the supervisor's report does in the three-tier hierarchy.

Life after Heart Transplantation

2002 ◽  
Vol 7 (4) ◽  
pp. 285-294 ◽  
Author(s):  
Lucia Savadori ◽  
Lorella Lotto ◽  
Rino Rumiati
Keyword(s):  
Heart Transplantation ◽  
Frame Of Reference ◽  
Physician Communication ◽  
Risk Averse ◽  
Medical Team ◽  
Perceived Knowledge ◽  
Surgical Technology ◽  
Postoperative Therapy ◽  
Life Expectation ◽  
Risk Judgments

Progress in surgical technology and in postoperative therapy has remarkably increased life expectation after heart transplantation. Nevertheless, patients still show a resistance to resume a normal life after transplantation, for example, to return to work. In this study we assume that after surgery patients become risk averse because they achieve a positive frame of reference. Because of this propensity toward risk aversion, they withhold from engaging in behavior that their physical condition would allow them in principle. Coherent with this assumption we found that compared to the medical team patients overestimate the degree of risk for routine activities. The study also showed that the representation of risk by the patients could be captured by a dreadfulness factor and a voluntariness factor. Patients' risk judgments were strongly and specifically predicted by the perceived degree of dreadfulness of the activity and, to a lesser extent, by the perceived knowledge of the consequences. Implications for patient-physician communication were explored.

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