Competition Leverage: How the Demand Side Affects Optimal Risk Adjustment

We study optimal risk adjustment in imperfectly competitive health insurance markets when high-risk consumers are less likely to switch insurer than low-risk consumers. First, we find that insurers still have an incentive to select even if risk adjustment perfectly corrects for cost differences among consumers. Consequently, the outcome is not efficient even if cost differences are fully compensated. To achieve first best, risk adjustment should overcompensate for serving high-risk agents to take into account the difference in mark- ups among the two types. Second, the difference in switching behavior creates a trade off between efficiency and consumer welfare. Reducing the difference in risk adjustment subsidies to high and low types increases consumer welfare by leveraging competition from the elastic low-risk market to the less elastic high-risk market. Finally, mandatory pooling can increase consumer surplus even further, at the cost of efficiency.health insurance;risk adjustment;imperfect competition;leverage

Selective Contracting and Foreclosure in Health Care Markets

We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives. Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.health insurance;uninsured;selective contracting;exclusion;foreclosure;anti-competitive effects

Competition for Traders and Risk

Abstract: The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top executives, and why direct intervention in trader compensation is called for. We present a model with both trader moral hazard and adverse selection on trader abilities. We demonstrate that as competition on the labour market for traders intensifies, banks optimally offer top traders contracts inducing them to take more risk, even if banks fully internalize the costs of negative outcomes. In this way, banks can reduce the surplus they have to offer to lower ability traders. In addition, we find that increasing banks’ capital requirements does not unambiguously lead to reduced risk-taking by their top traders.optimal contracts;remuneration policy;imperfect competition;financial institutions;risk

Gravitational waves from double white dwarfs

Double white dwarfs could be important sources for space based gravitational wave detectors like OMEGA and LISA. We use population synthesis to predict the current population of double white dwarfs in the Galaxy and the gravitational waves produced by this population. We simulate a detailed power spectrum for an observation with an integration time of 10^6 s. At frequencies below ~3 mHz confusion limited noise dominates. At higher frequencies a few thousand double white dwarfs are resolved individually. Including compact binaries containing neutron stars and black holes in our calculations yields a further few hundred resolved binaries and some tens which can be detected above the double white dwarf noise at low frequencies. We find that binaries in which one white dwarf transfers matter to another white dwarf are rare, and thus unimportant for gravitational wave detectors. We discuss the uncertainties and compare our results with other authors.Comment: 6 pages, to appear in the proceedings of the XXXIVth Rencontres de Moriond on "Gravitational Waves and Experimental Gravity", January 23-30, 199

Fun for Two

We performed populations synthesis calculations of single stars and binaries and show that binary evolution is extremely important for Galactic astronomy. We review several binary evolution models and conclude that they give quite different results. These differences can be understood from the assumptions related to how mass is transfered in the binary systems. Most important are 1) the fraction of mass that is accreted by the companion star during mass transfer, 2) the amount of specific angular momentum which is carried away with the mass that leaves the binary system.Comment: 7 pages, 0 figures to appear in the proceeding of the IAU Symposium 200, "The Formation of Binary Stars" eds. H. Zinnecker and R. Mathie

High Performance Direct Gravitational N-body Simulations on Graphics Processing Units -- II: An implementation in CUDA

We present the results of gravitational direct $N$-body simulations using the Graphics Processing Unit (GPU) on a commercial NVIDIA GeForce 8800GTX designed for gaming computers. The force evaluation of the $N$-body problem is implemented in ``Compute Unified Device Architecture'' (CUDA) using the GPU to speed-up the calculations. We tested the implementation on three different $N$-body codes: two direct $N$-body integration codes, using the 4th order predictor-corrector Hermite integrator with block time-steps, and one Barnes-Hut treecode, which uses a 2nd order leapfrog integration scheme. The integration of the equations of motions for all codes is performed on the host CPU. We find that for $N > 512$ particles the GPU outperforms the GRAPE-6Af, if some softening in the force calculation is accepted. Without softening and for very small integration time steps the GRAPE still outperforms the GPU. We conclude that modern GPUs offer an attractive alternative to GRAPE-6Af special purpose hardware. Using the same time-step criterion, the total energy of the $N$-body system was conserved better than to one in $10^6$ on the GPU, only about an order of magnitude worse than obtained with GRAPE-6Af. For N \apgt 10^5 the 8800GTX outperforms the host CPU by a factor of about 100 and runs at about the same speed as the GRAPE-6Af.Comment: Accepted for publication in New Astronom

Tools for analysis of Dirac structures on Hilbert spaces

In this paper tools for the analysis of Dirac structures on Hilbert spaces are developed. Some properties are pointed out and two natural representations of Dirac structures on Hilbert spaces are presented. The theory is illustrated on the example of the ideal transmission line. \u