Trade and Linked Exchange; Price Discrimination Through Transaction Bundling

In this paper we try to explain how price discrimination can cause bilateral trade patterns of the type seen under countertrade agreements. We interpret countertrade as a form of transaction bundling which can discriminate between potential trading partners and we combine characteristics from both explanations as to the existence of countertrade. There is both price discrimination through transaction bundling, and informational asymmetry in the form of uncertainty in the quality of the goods produced by trading partners in less developed countries (LDCs) leading to a partner preference from the side of the Western (DC) firm. Our paper shows that although the ability of firms in LDCs to overcome their creditworthiness constraints by engaging in countertrade arrangements may be restricted by this quality uncertainty as it reduces the willingness of a firm in a DC to exchange, the trade volume prospects of a firm in a LDC can be considerably enhanced if a countertrade transaction does occur. Our paper goes beyond the case of linked exchange, which is only one of the three cases of transaction bundling examined. The other two cases are that of the Western firm being a monopoly selling a bundle of two goods used as a benchmark case, and the more interesting case of the Western firm being the buyer of two goods and setting both two separate buying prices and a bundling (i.e. package) purchase price. Many procurement decisions are not simply a matter of price, but also the identity and reputation of the supplier matters, especially when the supplier is located in an LDC. We show than when bundling its purchases, the Western firm buyer will be willing to offer a bundled price greater than the sum of the two separate prices, as the option of a bundled purchase would increase its pro…ts even if there are no complementarities between the goods bundled. In our model the argument is that just as it is profitable for a monopolist to offer mixed bundling at a bundled price which is lower than the sum of the individual prices (hence exploiting the average willingness to pay), it is also profitable for a monopsonist to offer a bundled purchase price which is higher that the sum of the individual prices on offer (hence exploiting the average willingness to sell). Equally interestingly, it is found that a LDC can substantially increase its sales of a good with a high degree of quality uncertainty by being offered to bundle it with the sale of a more basic good with a low degree of quality uncertainty

Bundling in General Markets and in Health Care Systems

This paper provides an overview of bundling, by explaining, in general, the different forms that this practice can take in selling, buying or exchanging goods. We then proceed with a linear programming formulation in health care, to explain how the price of a bundle of resources can be calculated. We follow this by looking at the specific case of the practice of bundling by Medicare, the social insurance system for health care in the United States. We consider its advantages, disadvantages, and various recommendations

New development: Exploring public service markets

The authors explain why public service markets are fundamentally different from regulated utilities markets by looking at the product characteristics, market structure, funding oversight and legal arrangements in such markets. They highlight the issues which will be important as marketized delivery becomes increasingly mainstream in public services provision

Public Service Markets: Their Economics, Oversight and Regulation

This paper has three aims. Firstly, it aims to show that the language of markets can help to frame arguments about how effectively public services are achieving their intended outcomes. Using ‘market’ language and concepts may not always be comfortable for those from a traditional policy-making background. This paper suggests that thinking in these terms can nevertheless be very useful when designing investigations of the effectiveness of public services, whenever those services entail a degree of personalisation or user choice – as is currently the case, for example, in large parts of health, social care and education in England. Secondly, the paper aims to show that public service markets (public services that involve choice on the part of service users) differ quite fundamentally from private markets. Hence the conditions for the success, or failure, of public service markets to achieve public policy intentions may be different from the conditions that are necessary to foster successful (well functioning) markets in the private sector. Although there are analogies between private and public markets, some of which are discussed, the introduction of ‘market mechanisms’ into public service provision does not necessarily mean that the public service markets thus created will behave like private markets, or that policy intentions will be achieved simply by ‘leaving it to the market’. This, of course, has implications for how public service markets are overseen, managed, and regulated. In particular, the nature of the ‘goods’ that are ‘traded’ in public service markets is often very different from those in many private markets. This paper argues that not only are public services typically merit goods (characterised by positive externalities in their consumption), but that there is an important distinction between ‘choice’ merit goods, such as education or social care, and ‘compulsory’ merit goods, such as probation services or welfare-to-work programmes. Choice merit goods could in principle be provided through vouchers or direct payments to users, although doing so would not necessarily achieve other policy objectives such as universality or equity, even if all conditions were in place for the public market to operate efficiently (in practice, this latter requirement is also unlikely to be met). There may also be conflicts between how service users actually make choices, and how the state would ‘like’ them to (for example, hospital patients may value proximity of the hospital to their home more highly than its results on clinical performance measures). The ‘users’ of compulsory merit goods, on the other hand, may not wish to consume them, but it may be welfare-enhancing for society to coerce them to do so. The commissioning or direct provision by the state of such goods may meet public policy objectives more effectively than the market mechanism alone, as users are not able to internalise the full social benefits of their actions. Finally, building on these foundations, the paper discusses when public service markets are likely to be an effective method of achieving public policy objectives, and when they may not be. Issues that arise frequently in public service markets are discussed, such as principal-agent relationships; determining the quality of complex experience goods; the existence of local or regional monopolies of provision, and monopsonies of funding; the operation of competition law in the public sector; and how to deal with provider failure. The paper concludes with some suggestions for what this all means for those charged with overseeing public service markets in practice, based both on the preceding considerations, and on empirical evidence and experience to date

Influence of atopy on exhaled nitric oxide in patients with stable asthma and rhinitis

The level of exhaled NO is increased in patients with allergic asthma and seasonal rhinitis. The aim of this study was to investigate the significance of atopy on NO production in the lower airways. Measurements of exhaled NO were performed in 131 stable asthmatic patients with chronic mild asthma (95 atopics and 36 nonatopics), 72 patients with perennial rhinitis (57 atopics and 15 nonatopics) and 100 healthy controls (20 atopics and 80 nonatopics). Patients with either asthma or rhinitis had higher exhaled NO values (13.3&+/-1.2 parts per billion (ppb) and 11.7+/-1.1 ppb) than control subjects (4.8+/-0.3 ppb, p<0.01). Exhaled NO levels were significantly higher in atopic asthmatics (19+/-3.6 ppb) compared,vith nonatopic patients (5.6+/-0.8 ppb, p<0.001). Similar findings were observed in patients with rhinitis (13.3+/-1.3 ppb in atopics and 5.8+/-1.2 ppb in nonatopics, p<0.001). No difference was found in NO levels between atopic and nonatopic control subjects (4.8+/-0.8 ppb, and 4.5+/-0.3 ppb). In summary this study has shown that increased exhaled NO levels are detected only in atopic patients with asthma and/or rhinitis and not in nonatopic patients. These findings may suggest that it is rather the allergic nature of airways inflammation, which is mainly responsible for the higher NO production in the lower airways

Trade and Linked Exchange; Price Discrimination Through Transaction Bundling

In this paper we try to explain how price discrimination can cause bilateral trade patterns of the type seen under countertrade agreements. We interpret countertrade as a form of transaction bundling which can discriminate between potential trading partners and we combine characteristics from both explanations as to the existence of countertrade. There is both price discrimination through transaction bundling, and informational asymmetry in the form of uncertainty in the quality of the goods produced by trading partners in less developed countries (LDCs) leading to a partner preference from the side of the Western (DC) firm. Our paper shows that although the ability of firms in LDCs to overcome their creditworthiness constraints by engaging in countertrade arrangements may be restricted by this quality uncertainty as it reduces the willingness of a firm in a DC to exchange, the trade volume prospects of a firm in a LDC can be considerably enhanced if a countertrade transaction does occur. Our paper goes beyond the case of linked exchange, which is only one of the three cases of transaction bundling examined. The other two cases are that of the Western firm being a monopoly selling a bundle of two goods used as a benchmark case, and the more interesting case of the Western firm being the buyer of two goods and setting both two separate buying prices and a bundling (i.e. package) purchase price. Many procurement decisions are not simply a matter of price, but also the identity and reputation of the supplier matters, especially when the supplier is located in an LDC. We show than when bundling its purchases, the Western firm buyer will be willing to offer a bundled price greater than the sum of the two separate prices, as the option of a bundled purchase would increase its pro…ts even if there are no complementarities between the goods bundled. In our model the argument is that just as it is profitable for a monopolist to offer mixed bundling at a bundled price which is lower than the sum of the individual prices (hence exploiting the average willingness to pay), it is also profitable for a monopsonist to offer a bundled purchase price which is higher that the sum of the individual prices on offer (hence exploiting the average willingness to sell). Equally interestingly, it is found that a LDC can substantially increase its sales of a good with a high degree of quality uncertainty by being offered to bundle it with the sale of a more basic good with a low degree of quality uncertainty.

Electronic commerce and linked exchange Price discrimination through transaction bundling

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