A Procurement Auction Model Under Supplier Uncertainty

As business-to-business commerce shifts to the Internet, newer suppliers with cheaper but unreliable technologies enter the market place to win orders from firms by beating the price of their perfectly reliable (but expensive) competitors. The dilemma facing purchasing firms is the allocation of the tender across suppliers of varying supply reliability. We model the procurement problem as a sealed-bid auction where the buyer has to allocate purchases between an expensive but reliable supplier and a cheaper but unreliable supplier, and the suppliers specify prices for different proportions of the tender awarded to them. A unique feature of our model is that it allows the purchasing firm to reserve the right to change the size of the total tender awarded depending on the nature of the bids received from the suppliers. We prove that the set of Nash equilibrium outcomes coincides with the set of efficient outcomes, and for strictly convex cost functions, the outcome is unique. Further, we show that the possibility of implicit supplier collusion is strengthened in that the suppliers may structure their bids forcing the buyer to allocate the tender resulting in the worst-case (highest price) scenario for him. We also show that the Anton-Yao (A-Y, 1989) model can be interpreted as a limiting case of our model and that the efficient outcome derived in this paper is the only robust outcome in the A-Y model.

Negative Reality of the HIV Positives: Evaluating Welfare Loss in a Low Prevalence Country

Using primary household data from India we estimate family utility function parameters that measure the relative importance of consumption, schooling of children and health (both physical and mental) and find that mental health is far more important than consumption or children’s schooling in determining household utility. We then estimate that the monetary equivalent of the welfare loss to an HIV family is Rs. 66,039 per month, whereas the losses to an HIV male and female are Rs. 67,601 and Rs. 65,120 per month respectively. These figures are huge given that the average per capita consumption expenditure of the families in our sample is just Rs. 1,019 per month. This huge magnitude is not surprising as it includes private valuation of one’s own life as well as the cost of stigma for being HIV positive. In addition, the annual loss from external transfers (through debt, sale of assets and social insurance) accounts for 2.6% of annual health expenditure and 0.12% of GDP in 2004. The significance of mental health in welfare evaluation can be gauged from the fact that, for an average HIV family, a whopping 74% of the welfare loss comes from aspects of mental health.HIV/AIDS; Mental Health; Physical Health; Welfare Loss; Family Preference

Integrating Mental Health in Welfare Evaluation: An Empirical Application

This paper presents simple measures of individual and family mental health indices based on axiomatic foundations and integrates mental health into a neoclassical model that allows for proper substitution possibilities in the family preferences and quantifies its significance in family utility. We find that mental health effects are far more important than the effect of consumption or children’s schooling in determining family utility. We illustrate the usefulness of our approach by considering the case of HIV/AIDS experience in India. Using our approach, we find that while there are no significant differences in per capita consumption and schooling between HIV and NON HIV families, the cost of HIV/AIDS are still considerably large due to the inclusion of mental health. Integrating mental health in a utility maximization framework helps us quantify these costs.

Negative reality of the HIV positives: Evaluating welfare loss in a low prevalence country

Using primary household data from India we estimate family utility function parameters that measure the relative importance of consumption, schooling of children and health (both physical and mental) and find that mental health is far more important than consumption or children's schooling in determining household utility. We then estimate that the monetary equivalent of the welfare loss to an HIV family is Rs. 66,039 per month, whereas the losses to an HIV male and female are Rs.67,601 and Rs. 65,120 per month respectively. These figures are huge given that the average per capita consumption expenditure of the families in our sample is just Rs.1,019 per month. This huge magnitude is not surprising as it includes private valuation of one's own life as well as the cost of stigma for being HIV positive. In addition, the annual loss from external transfers (through debt, sale of assets and social insurance) accounts for 2.6 of annual health expenditure and 0.12 of GDP in 2004. The significance of mental health in welfare evaluation can be gauged from the fact that, for an average HIV family, a whopping 74 of the welfare loss comes from aspects of mental health.

Integrating mental health in welfare evaluation: An Empirical application

This paper presents simple measures of individual and family mental health indices based on axiomatic foundations and integrates mental health into a neoclassical model that allows for proper substitution possibilities in the family preferences and quantifies its significance in family utility. We find that mental health effects are far more important than the effect of consumption or children's schooling in determining family utility. We illustrate the usefulness of our approach by considering the case of HIV/AIDS experience in India. Using our approach, we find that while there are no significant differences in per capita consumption and schooling between HIV and NON HOV families, the cost of HIV/AIDS are still considerably large due to the inclusion of mental health. Integrating mental health in a utility maximization framework helps us quantify these costs.

A Procurement Auction Model Under Supplier Uncertainty

As business-to-business commerce shifts to the Internet, newer suppliers with cheaper but unreliable technologies enter the market place to win orders from firms by beating the price of their perfectly reliable (but expensive) competitors. The dilemma facing purchasing firms is the allocation of the tender across suppliers of varying supply reliability. We model the procurement problem as a sealed-bid auction where the buyer has to allocate purchases between an expensive but reliable supplier and a cheaper but unreliable supplier, and the suppliers specify prices for different proportions of the tender awarded to them. A unique feature of our model is that it allows the purchasing firm to reserve the right to change the size of the total tender awarded depending on the nature of the bids received from the suppliers. We prove that the set of Nash equilibrium outcomes coincides with the set of efficient outcomes, and for strictly convex cost functions, the outcome is unique. Further, we show that the possibility of implicit supplier collusion is strengthened in that the suppliers may structure their bids forcing the buyer to allocate the tender resulting in the worst-case (highest price) scenario for him. We also show that the Anton-Yao (A-Y, 1989) model can be interpreted as a limiting case of our model and that the efficient outcome derived in this paper is the only robust outcome in the A-Y model

A Procurement Auction Model Under Supplier Uncertainty

As business-to-business commerce shifts to the Internet, newer suppliers with cheaper but unreliable technologies enter the market place to win orders from firms by beating the price of their perfectly reliable (but expensive) competitors. The dilemma facing purchasing firms is the allocation of the tender across suppliers of varying supply reliability. We model the procurement problem as a sealed-bid auction where the buyer has to allocate purchases between an expensive but reliable supplier and a cheaper but unreliable supplier, and the suppliers specify prices for different proportions of the tender awarded to them. A unique feature of our model is that it allows the purchasing firm to reserve the right to change the size of the total tender awarded depending on the nature of the bids received from the suppliers. We prove that the set of Nash equilibrium outcomes coincides with the set of efficient outcomes, and for strictly convex cost functions, the outcome is unique. Further, we show that the possibility of implicit supplier collusion is strengthened in that the suppliers may structure their bids forcing the buyer to allocate the tender resulting in the worst-case (highest price) scenario for him. We also show that the Anton-Yao (A-Y, 1989) model can be interpreted as a limiting case of our model and that the efficient outcome derived in this paper is the only robust outcome in the A-Y model

Integrating Mental Health in Welfare Evaluation: An Empirical Application

This paper presents simple measures of individual and family mental health indices based on axiomatic foundations and integrates mental health into a neoclassical model that allows for proper substitution possibilities in the family preferences and quantifies its significance in family utility. We find that mental health effects are far more important than the effect of consumption or children’s schooling in determining family utility. We illustrate the usefulness of our approach by considering the case of HIV/AIDS experience in India. Using our approach, we find that while there are no significant differences in per capita consumption and schooling between HIV and NON HIV families, the cost of HIV/AIDS are still considerably large due to the inclusion of mental health. Integrating mental health in a utility maximization framework helps us quantify these costs

Negative Reality of the HIV Positives: Evaluating Welfare Loss in a Low Prevalence Country

Using primary household data from India we estimate family utility function parameters that measure the relative importance of consumption, schooling of children and health (both physical and mental) and find that mental health is far more important than consumption or children’s schooling in determining household utility. We then estimate that the monetary equivalent of the welfare loss to an HIV family is Rs. 66,039 per month, whereas the losses to an HIV male and female are Rs. 67,601 and Rs. 65,120 per month respectively. These figures are huge given that the average per capita consumption expenditure of the families in our sample is just Rs. 1,019 per month. This huge magnitude is not surprising as it includes private valuation of one’s own life as well as the cost of stigma for being HIV positive. In addition, the annual loss from external transfers (through debt, sale of assets and social insurance) accounts for 2.6% of annual health expenditure and 0.12% of GDP in 2004. The significance of mental health in welfare evaluation can be gauged from the fact that, for an average HIV family, a whopping 74% of the welfare loss comes from aspects of mental health

Integrating Mental Health in Welfare Evaluation: An Empirical Application

This paper presents simple measures of individual and family mental health indices based on axiomatic foundations and integrates mental health into a neoclassical model that allows for proper substitution possibilities in the family preferences and quantifies its significance in family utility. We find that mental health effects are far more important than the effect of consumption or children’s schooling in determining family utility. We illustrate the usefulness of our approach by considering the case of HIV/AIDS experience in India. Using our approach, we find that while there are no significant differences in per capita consumption and schooling between HIV and NON HIV families, the cost of HIV/AIDS are still considerably large due to the inclusion of mental health. Integrating mental health in a utility maximization framework helps us quantify these costs