Do health behaviour and psychosocial risk factors explain the European East-West gap in health status?

Mortality rates are much more favourable in Western European countries than in those of Eastern Europe. Health behaviour and psychosocial factors have been suggested to be important contributors to East-West differences in mortality and health status.status: publishe

Long-Term Contracts Under the Threat of Supplier Default

Contracting with suppliers prone to default is an increasingly common problem in some industries, particularly automotive manufacturing. We model this phenomenon as a two-period contracting game with two identical suppliers, a single buyer, deterministic demand, and uncertain production costs. The suppliers are distressed at the start of the game and do not have access to external sources of capital; hence, revenues from the buyer are crucial in determining whether default occurs. The production cost of each supplier is the sum of two stochastic components: a common term that is identical for both suppliers (representing raw materials costs, design specifications, etc.) and an idiosyncratic term that is unique to a given supplier (representing inherent firm capability). The buyer chooses a supplier and then decides on a single- or two-period contract. Comparing models with and without the possibility of default, we find that, without the possibility of supplier failure, the buyer always prefers short-term contracts over long-term contracts, whereas this preference is typically reversed in the presence of failure. Neither of these contracts coordinates the supply chain. We also consider dynamic contracts, in which the contract price is partially tied to some index representing the common component of production costs (e.g., commodity prices of raw materials such as steel or oil), allowing the buyer to shoulder some of the risk from cost uncertainty. We find that dynamic long-term contracts allow the buyer to coordinate the supply chain in the presence of default risk. We also demonstrate that our results continue to hold under a variety of alternative assumptions, including stochastic demand, allowing the buyer the option of subsidizing a bankrupt supplier via a contingent transfer payment or loan and allowing the buyer to unilaterally renegotiate contracts. We conclude that the possibility of supplier default offers a new reason to prefer long-term contracts over short-term contracts.supply chain management, financial default, contracting, game theory

Independence of Capacity Ordering and Financial Subsidies to Risky Suppliers

The risk of supply disruptions because of suppliers' financial problems plays a prominent role in manufacturers' risk portfolios. Even large suppliers (e.g., Delphi) could file for bankruptcy, and manufacturers' actions, such as financial subsidies to suppliers, profoundly affect suppliers' financial health. Using a dynamic, stochastic, periodic-review model of the manufacturer's joint capacity reservation and financial subsidy decisions and a general firm-value model of the supplier's financial state, this paper addresses the following questions: What is the optimal joint capacity ordering and financial subsidy policy for the manufacturer? Must subsidy and capacity ordering decisions be made jointly? How good are the recommendations from the traditional procurement models, which ignore the benefits of controlling the supplier's financial state through subsidies? The paper presents general assumptions that allow the manufacturer to make ordering decisions independent of subsidy decisions and investigates interactions between ordering and subsidy decisions when these assumptions are violated. Conditions are presented for the optimal subsidy policy to have a "subsidize-up-to" structure and for the optimal ordering decisions to be newsvendor fractiles.supply risk, operations and finance interface, bankruptcy, financial defaults, procurement, supplier management, capacity investments, Markov decision processes