Quality Uncertainty And Adverse Selection In Online Sponsored-Search Markets

Sponsored-search mechanisms, where advertisers bid for better placement in the listing of search results on Yahoo! and Google, have emerged as the dominant revenue model for online search engines. Interestingly, Yahoo! and Google employ different mechanisms to determine the placement of bidders’ advertisements. This provides an unprecedented opportunity to extend the research relating quality and advertising in traditional markets to the online setting, and also examine whether intervention by the search intermediary impacts the outcomes observed in these markets. Using data from online sponsored-search auctions, we examine the relationship between advertisers’ quality and their advertising-intensity, indicated by their willingness to pay for search listings. We assess how this relationship differs across search, experience, and credence products characterized by differing degrees of quality uncertainty as well as across the two markets. We find significant differences in the quality-advertising relationships across the three product categories as well as across the two market mechanisms. We discuss the implications of our findings for consumers as well as intermediaries, and provide directions for future research in this emerging context

The State of Private Sector Electronic Labour Exchange Services in Canada

This report has two aims. The first is to provide a descriptive overview of the services offered by private sector electronic labour exchanges (ELEs) in Canada. The second is to assess those services in terms of their likely effects on labour market matching, their accessibility, and the degree to which they satisfy the needs of all Canadian jobseekers and employers. The report finds that there is a robust private sector in ELE services in Canada. The private sector provides a broader range of services than the main public sector alternative, Job Bank. However, there are key areas in which the private sector does not deliver adequate services. The public sector, through Job bank, can take the lead in providing specialized job-search services tailored toward groups with unique labour market needs.labour market matching, electronic labour exchange services, private sector, public sector

Quality Uncertainty And Adverse Selection In Sponsored Search Markets

Sponsored search mechanisms, where advertisers bid for placement to be as close to the top in the listing of search results, are the fastest growing among online search models. Sponsored search in popular search services such as Google and Yahoo! employ an auction mechanism wherein firms can bid, for a better placement in the (sponsored) search results, on relevant keywords used by consumers in their search process. This provides an unprecedented opportunity to test some of the predictions of earlier research relating quality and advertising, in the online setting. While sponsored search mechanisms have been gaining popularity, they can potentially introduce a bias in the listing of search results. In particular, sponsored search mechanisms that enable low quality bidders to be placed at the top of the search listings can adversely affect consumer welfare. Our study uses data from online sponsored search auctions to examine the relationship between advertisers' quality and their bidding strategies. Specifically we seek to understand if advertisers' bidding strategies differ across products characterized by different degrees of quality-uncertainty. Our results indicate that there are significant differences in the bidding strategies of sellers of search goods as compared to sellers of experience and credence goods, and that there is significant adverse selection in product categories characterized by greater uncertainty. We discuss the implications of our findings for consumers, advertisers, and intermediaries and provide directions for future research in this emerging context

Integrated Delivery Networks: In Search of Benefits and Market Effects

Integrated Delivery Networks (IDNs) have very different stated purposes than mere collections of hospitals: to coordinate care across the continuum of health services and to manage population health. IDN advocates claim that these complex enterprises yield both societal benefits and performance advantages over less integrated competitors. The purpose of this analysis is to evaluate the evidence to support these claims.For the study, researchers performed a review of the academic literature on IDN performance, as well as an analysis of publicly available quality and financial data from 15 of the biggest not-for-profit IDNs in the U.S., including Sutter Health in Northern California. The authors compared the publicly available performance information on the IDNs' flagship hospital in its principal regional market with that flagship's most significant in-market competitor. The study found that it is possible for integrated delivery networks to offer meaningful benefits, but there is little evidence they have reduced costs or improved the quality of care. Findings include:Hospital-physician integration has raised physician costs, hospital prices and per capita medical care spending;Hospital integration into health plan operations and capitated contracting was not associated either with clinical efficiency or financial efficiencyProviders are likely to see a decrease in operating margins and return on capital as they invest in IDN developmen

Innovative Strategies to Help Affordable Consumer Operated and Oriented Plans (CO-OPs) Compete in New Insurance Marketplaces

Outlines provisions in the federal health reform law for CO-OPs, or innovative nonprofit health insurance and care plans designed for individuals and small businesses, challenges, and strategies for long-term sustainability and financial success

Whose Click Fraud Data Do You Trust? Effect Of Click Fraud On Advertiser’s Trust And Sponsored Search Advertising Decisions

Online sponsored search has emerged as a dominant business model for majority of search engines and as a popular advertising mechanism for online retailers. However, sponsored search advertising is being negatively impacted by click fraud which involves the intentional clicking on sponsored links with the purpose of gaining undue monetary returns for the search engine or harming a particular advertiser by depleting its advertising budget. While search engines tend to compensate advertisers to an extent for click frauds, it still leaves an element of uncertainty in the minds of advertisers whether search engine is being faithful in reporting the click fraud numbers. Armed with additional data available from third party click fraud audit companies, advertisers may have more reasons to suspect click fraud numbers reported by search engines if there is a discrepancy between the numbers reported by two sources (search engines and third party click fraud audit companies). While the phenomenon of click fraud has been acknowledged to exist, its effect on sponsored search advertisers’ trust and their decision to advertise with a particular search engine has not been given sufficient attention in the literature. As an initial step, in this research in progress study, we develop a theoretical model to examine the effect of click fraud on advertiser’s trust in search engine and its subsequent impact on advertiser’s decision to adjust advertising spend for different search engines. In this paper, we also outline the proposed experimental design to validate the theoretical model subsequently in future. Broadly, the research suggests that sponsored search advertisers are likely to adjust their advertising spend based on level of trust they have in search engine, click fraud numbers discrepancy, and return on investment obtained from advertising on that particular search engine

Adaptor of last resort? An economic perspective on the government’s role in adaptation to climate change

Abstract Individuals and societies have always adapted to change, whether catastrophic or slow onset. Over the last two centuries, however, governments have significantly extended their role as ultimate social manager of risk.  It is as yet unclear whether, how, or to what extent governments will add adaptation to climate change to their portfolio of responsibilities.  This report investigates this question on the basis of review and analysis of economic and policy thinking on the issues, and by using a new dataset on the 2011 Brisbane flood. Uncertainties about the future impacts of climate change obviate definitive conclusions about future adaptation actions and insights for specific situations cannot be generalised.  Economic precepts suggest that governments should limit intervention to cases of genuine market failure, such as the provision of information on likely impacts of climate change including at the local level, or to support for people affected by uninsurable events.  But any role as ‘insurer of last resort’ needs to be circumscribed by rigorous social cost-benefit analysis to ensure that government intervention is beneficial, in the context of the need to adapt to climatic changes.  Although the phenomenon of ‘government failure’ is generally ignored in the adaptation literature (and often by policy makers), it too can stymie efficient adaptation.  A standard justification for government intervention is market failure, including misperception of risk by individuals and businesses.  We use Brisbane property prices before and after the January 2011 flood, as well as property-level flood risk information to test the hypothesis that buyers do not accurately perceive the risk of riverine flooding.  The results indicate that buyers do take risk into account, and even discriminate between zones of differing flood risk.  The concepts of ‘government as insurer of last resort’ and ‘government as insurer of first resort’ as alternative forms of intervention in markets are examined with a view to disambiguation.  In contrast to much current thinking in academic and government circles, we conclude that the government should not act as an ‘adaptor of first or last resort’.  Rather, government can best contribute to efficient adaptation by reducing the economic costs and institutional barriers to adaptation faced by individuals and organisations.Comprehensive micro-economic reform, and the promotion of institutional flexibility are potential ‘no regrets’ strategies because they will also promote economic growth and welfare.Please cite as: Dobes, L, Jotzo, F, Doupé, P 2013 Adaptor of last resort? An economic perspective on the Government’s role in adaptation to climate change, National Climate Change Adaptation Research Facility, Gold Coast, pp. 81.Individuals and societies have always adapted to change, whether catastrophic or slow onset. Over the last two centuries, however, governments have significantly extended their role as ultimate social manager of risk.  It is as yet unclear whether, how, or to what extent governments will add adaptation to climate change to their portfolio of responsibilities.  This report investigates this question on the basis of review and analysis of economic and policy thinking on the issues, and by using a new dataset on the 2011 Brisbane flood. Uncertainties about the future impacts of climate change obviate definitive conclusions about future adaptation actions and insights for specific situations cannot be generalised.  Economic precepts suggest that governments should limit intervention to cases of genuine market failure, such as the provision of information on likely impacts of climate change including at the local level, or to support for people affected by uninsurable events.  But any role as ‘insurer of last resort’ needs to be circumscribed by rigorous social cost-benefit analysis to ensure that government intervention is beneficial, in the context of the need to adapt to climatic changes.  Although the phenomenon of ‘government failure’ is generally ignored in the adaptation literature (and often by policy makers), it too can stymie efficient adaptation.  A standard justification for government intervention is market failure, including misperception of risk by individuals and businesses.  We use Brisbane property prices before and after the January 2011 flood, as well as property-level flood risk information to test the hypothesis that buyers do not accurately perceive the risk of riverine flooding.  The results indicate that buyers do take risk into account, and even discriminate between zones of differing flood risk.  The concepts of ‘government as insurer of last resort’ and ‘government as insurer of first resort’ as alternative forms of intervention in markets are examined with a view to disambiguation.  In contrast to much current thinking in academic and government circles, we conclude that the government should not act as an ‘adaptor of first or last resort’. Rather, government can best contribute to efficient adaptation by reducing the economic costs and institutional barriers to adaptation faced by individuals and organisations.Comprehensive micro-economic reform, and the promotion of institutional flexibility are potential ‘no regrets’ strategies because they will also promote economic growth and welfare.Please cite as: Dobes, L, Jotzo, F, Doupé, P 2013 Adaptor of last resort? An economic perspective on the Government’s role in adaptation to climate change, National Climate Change Adaptation Research Facility, Gold Coast, pp. 81.&nbsp

A New Analysis of Corporate Social Responsibility

LBJ School of Public Affair

In Absolute or Relative Terms?: How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice

This paper provides field evidence on (a) how price framing affects consumers' decision to switch health insurance plans and (b) how the price elasticity of demand for health insurance can be influenced by policymakers through simple regulatory efforts. In 2009, in order to foster competition among health insurance companies, German federal regulation required health insurance companies to express price differences between health plans in absolute Euro values rather than percentage point payroll tax differences. Using individuallevel panel data, as well as aggregated health plan-level panel data, we find that the reform led to a sixfold increase in an individual's switching probability and a threefold demand elasticity increase.Health insurance, health plan switching, price competition, price elasticity, SOEP

Sources of Advantageous Selection: Evidence from the Medigap Insurance Market

We provide strong evidence of advantageous selection in the Medigap insurance market, and analyze its sources. Using Medicare Current Beneficiary Survey (MCBS) data, we find that, conditional on controls for the price of Medigap, medical expenditures for senior citizens with Medigap coverage are, on average, about $4,000 less than for those without. But, if we condition on health, expenditures for seniors on Medigap are about$2,000 more. These two findings can only be reconciled if those with less health expenditure risk are more likely to purchase Medigap, implying advantageous selection. By combining the MCBS and the Health and Retirement Study (HRS), we investigate the sources of this advantageous selection. These include income, education, longevity expectations and financial planing horizons, as well as cognitive ability. Once we condition on all these factors, seniors with higher expected medical expenditure are indeed more likely to purchase Medigap. Surprisingly, risk preferences do not appear to be a source of advantageous selection. But cognitive ability emerges as a particularly important factor, consistent with a view that many senior citizens have difficulty understanding Medicare and Medigap rules.