Price elasticity of demand for new and recurring opioid prescriptions

Objective: Several U.S. states have recently enacted excise taxes to curb prescription opioid use and other states are considering similar measures. We assessed the effects of increasing out-of-pocket costs (OPC) on new and recurring opioid fills. Methods: We conducted a retrospective cohort study of opioid-naive individuals presenting with acute back pain using data from a nationwide claims repository. We estimated the effect of OPC on the initiation of opioid treatment in logistic regressions, controlling for socio-demographics, medical history, healthcare utilization, insurance type, and region. With the same covariates plus morphine milligram equivalents and days supplied, we estimated the effect of OPC on the number of opioid fills in negative binomial regressions. We report the price elasticity of demand (PED) for prescription opioids, defined as the percentage change in outcome resulting from a two-fold increase in OPC. Results: Of 25,531 adults diagnosed with acute back pain in Q1 of 2018, 2,451 (9.6%) filled at least one opioid prescription. In multivariable regression, the association between OPC and initiating opioid treatment was not significant (PED= -1.9%; 95% CI: -5.5%, 1.7%). However, by region, the PED was -10.3% (95% CI: -18.1%, -2.4%) in the coastal states and 1.6% (95% CI: -2.5%, 5.7%) in the central-southern states. The PED for the number of prescription fills was -3.7% (95% CI: -7.3%, -0.1%), which also differed by region. In the coastal states, the PED was -15.2% (95% CI: -24.7%, -5.7%) and in the central-southern states -1.5% (95% CI: -5.4%, 2.4%). Conclusions: Opioid fills were price sensitive in the coastal states but not in the central-southern states. Policies that would increase OPC might have a restraining effect on opioid consumption in parts, but not all of the U.S.

Information Frictions, Internet, and the Relationship between Distance and Trade

We examine how the adoption of information communication technology affects bilateral trade. The context is a public program in Norway that rolled out broadband access points leading to plausibly exogenous variation in the availability and adoption of broadband by firms. We find that broadband makes trade patterns more sensitive to distance and economic size. These results are consistent with a model of trade with variable elasticity of demand. The model predicts that adoption of a technology that lowers information frictions enlarges the choice set of exporters and importers. This makes demand more elastic with respect to trade costs and thus distance. (JEL D83, F14, L86, O33)

Incorporating ‘Mortgage-Loan’ Contracts into an Agricultural Supply Chain Model under Stochastic Output

This paper constructs an internal financing model in which the purchaser acts as the core leading enterprise to provide loans when the farmer has fixed assets as collateral. Numerical results show that the existence of fixed assets will increase the expected profit of the farmer, redistributing the risk and profit between the purchaser and the farmer. At the same time, the purchaser and the government are encouraged to provide more funds to the farmer with low value of its fixed assets, which will aid the overall return of the supply chain and the development of supply chain finance. In addition, under the framework of this model, the increase of agricultural production is beneficial to the farmer, not the purchaser. In the case of the same output level, we can alleviate this problem by selecting high-end agricultural products with high price elasticity of demand and high choking price so as to improve the profits of both purchaser and farmer.

Entry, Variable Markups, and Business Cycles

The creation of new businesses declines in recessions. In this paper, I study the effects of pro-cyclical business formation on aggregate employment in a general equilibrium model of firm dynamics. The key features of the model are that the elasticity of demand faced by firms falls with their market share and that adjustment costs slow the reallocation of employment between firms. In response to a decline in entry, incumbent firms' market shares increase, their elasticity of demand falls, and they increase their markups and reduce employment. To quantify the model, I study the relationship between variable input use and revenue in panel data on large firms. Viewed through the lens of my model, my estimates imply that for large firms, the within-firm elasticity of the markup to relative sales is 25 percent. I use the calibrated model to study shocks to entry, finding that a fall in entry can lead to a significant contraction in employment. A shock to entry that replicates the decline in the number of businesses during the Great Recession generates a prolonged 2.5 percent fall in employment in the model. Finally, I show that the declining correlation between revenue and variable input use over the past 30 years implies that the effect of entry on the business cycle has become stronger over time.

Estimating the price elasticity of demand for cigarettes in South Africa using the Deaton approach

ObjectiveTo estimate the price elasticity of demand for South Africa and thereby contribute to growing the evidence base of the likely impact of excise taxes on cigarette demand in low-income and middle-income countries.MethodsWe employ the Deaton method, using wave 5 data from the South African National Income Dynamics Study, to estimate the cigarette price elasticity for South Africa. We used a sample of 6820 households.ResultsOf the 6 820 households in the sample for which we had sufficient data, 1341 (19.7%) spent money on tobacco. The price elasticity of demand for cigarettes is estimated at −0.86 (95% CI −1.37 to −0.35), implying that the demand for cigarettes in South Africa declines by 8.6% for every 10% increase in price.ConclusionThe negative price elasticity estimate for South Africa indicates that increases in the excise tax are particularly effective in controlling cigarette consumption. However, given the presence of a significant illicit tobacco market in the country, it is important that authorities augment tax measures with strategies that curb the illicit trade in cigarettes.

An Analysis of the Income and Price Elasticity of Demand for Housing in View of Price Dynamics on the Residential Property Market

In both the global and the domestic approach, the real estate market is a multifaceted domain of study, constituting a specific and imperfect system. Researchers have to rely on increasingly advanced analytical tools to capture the structural complexity of real estate markets. Real estate prices are influenced by contradictory behaviors of market participants. This observation prompted the authors to analyze the income and price elasticity of demand for housing by calculating elasticity coefficients in view of changes in housing prices and the Veblen effect. This problem was analyzed based on a review of the literature and the results of an experiment. The results of the current study can be used to confirm the presence of the Veblen effect on the housing market based on the adopted criteria. The coefficients of price and income elasticity of demand for housing were calculated in view of the price dynamics on the real estate market to paint a more complete picture of reality and explain market processes.

Rational regulation of water-seeking effort in rodents

In the laboratory, animals’ motivation to work tends to be positively correlated with reward magnitude. But in nature, rewards earned by work are essential to survival (e.g., working to find water), and the payoff of that work can vary on long timescales (e.g., seasonally). Under these constraints, the strategy of working less when rewards are small could be fatal. We found that instead, rats in a closed economy did more work for water rewards when the rewards were stably smaller, a phenomenon also observed in human labor supply curves. Like human consumers, rats showed elasticity of demand, consuming far more water per day when its price in effort was lower. The neural mechanisms underlying such “rational” market behaviors remain largely unexplored. We propose a dynamic utility maximization model that can account for the dependence of rat labor supply (trials/day) on the wage rate (milliliter/trial) and also predict the temporal dynamics of when rats work. Based on data from mice, we hypothesize that glutamatergic neurons in the subfornical organ in lamina terminalis continuously compute the instantaneous marginal utility of voluntary work for water reward and causally determine the amount and timing of work.

Factors affecting the demand for native chicken eggs in Surakarta City

Native chicken egg is one of the animal protein sources to meet the need for protein. This study analyzes what factors affect the demand for native chicken eggs in Surakarta City and examine the elasticity of demand for native chicken eggs in Surakarta City. The primary method of research is descriptive. This research was conducted in Harjodaksino Market, Jongke Market, Legi Market, Gede Market, dan Sangkrah Market. This study carried out the research location selection purposively and used 100 respondent end consumers of native chicken eggs. The data analysis method used is multiple linear regression. The result showed that factors that affect the demand for native chicken eggs in Surakarta City are native chicken eggs prices, laying hen eggs prices, duck egg prices, native chicken meat prices, broiler chicken meat prices, and rice prices. Price elasticity indicates that the demand for native chicken eggs is elastic. Cross elasticity showed that laying hen eggs, duck eggs, and native chicken meat are substitute goods for native chicken eggs. In contrast, broiler chicken meat dan rice is complementary good for native chicken eggs.

Education, taxation and the perceived effects of sin good consumption

In a setting in which an agent has a behavioral bias that causes an underestimation or an overestimation of the health consequences of sin goods consumption, the paper studies how a social planner can affect the demand of such goods through education and taxation. When only optimistic consumers are present, depending on the elasticity of demand of the sin good with respect to taxation, the two instruments can be substitutes or complements. When consumers are heterogeneous, the correcting effect that taxation has on optimistic consumers has unintended distorting effects on both pessimistic and rational ones. In this framework, educational measures, by aligning biased consumers’ perceptions closer to the true probability of health damages, are more effective than taxation.