Regulation, Competition and Liberalization

In many countries throughout the world, regulators are struggling to determine whether and how to introduce competition into regulated industries. This essay examines the complexities involved in the liberalization process. While stressing the importance of case-specific analyses, this essay distinguishes liberalization policies that generally are pro-competitive from corresponding anti-competitive liberalization policiesCompetition, Regulation, Liberalization

Principles of regulatory policy design

The author contrasts command-and-control regulation (tight control of water purification, for example) with more flexible forms, including incentive regulation (such as price cap regulation), potential regulation (providing for closer scrutiny if enough customers complain), and reactive rather than proactive policies (the firm proposing actions, the regulatory saying yes or no). He contrasts informing regulation (for example, requiring that consumers be informed about ingredients in a product) and enforcing regulation (for example, prohibiting the use of certain chemicals in foods). A country's institutional structure can limit the regulators'potential for commitment, he says -- especially if regulators are limited in their ability to deliver rewards or penalties. The scope and function of regulation may also be fairly limited when technological conditions allow competition to discipline producers. Sophisticated buyers with economic power may reduce the need for regulatory control, and rapid technological change can render comprehensive command-and-control regulation ineffective or debilitating. Many forces operate simultaneously, making regulatory design a complex undertaking. Inertia is one such influence. Regulatory policies that once served an important purpose sometimes persist even though they no longer serve that purpose -- sometimes because they favor a constituency that convinces the regulator to keep the control in place. Subsidies and tariff protection often continue long past the time needed to promote the development of an infant industry, for example. When there is limited public outcry against continuing the special treatment, and the affected firms strongly urge its continuance, the regulator may be convinced to continue special treatment that no longer serves the public interest. Regulation may also be affected by the regulators'personal ambition. When regulators are"captured"by regulated firms -- diverted from the goal of protecting consumers through the promise of personal rewards for favorable treatment of the firms -- regulation may not serve society's best interest. Even if regulators are not motivated by self-interest, their ideas of what is best for society may differ from those of other government officials or of society at large. When that happens, which goals are pursued depends largely on the autonomy regulators that are granted and on the balance of power among government bodies.Regulation should be viewed in this large context to be understood fully.Administrative&Regulatory Law,Environmental Economics&Policies,National Governance,Economic Theory&Research,Insurance&Risk Mitigation

Incentives for Sabotage in Vertically Related Industries

We show that the incentives a vertically integrated supplier may have to disadvantage or "sabotage" the activities of downstream rivals vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation.Regulation, Vertical Integration, Access Pricing, Sabotage

Does the Form of Physician Compensation Affect the Quality of Care in Medicaid HMOS?

In the United States a growing fraction of Medicaid participants are enrolled in Health Maintenance Organizations (HMOs). The HMOs contract with physicians to provide health care services to the enrollees. Generally the physicians are compensated either via fee for service (FFS) or capitated arrangements. This paper investigates whether the means by which the physicians are compensated influences the quality of care received by enrollees. Using data for all Medicaid HMO enrollees in a large state, we find that enrollees in HMOs that pay their Primary Care Physicians (PCPs) exclusively via FFS arrangements are more likely to receive services for which the HMO’s PCPs receive additional compensation. Further, these enrollees are less likely to receive services for which the HMO’s PCPs do not receive additional compensation. These findings suggest that financial incentives may influence the behavior of PCPs in Medicaid HMOs, and thus the health care received by Medicaid participants enrolled in HMOs.

Incentives for Anticompetitive Behavior by Public Enterprises

We examine the incentives that public enterprises may have to undertake anticompetitive activities. These activities include setting prices below marginal cost, raising the operating costs of existing rivals, erecting entry barriers to preclude the operation of new competitors, and circumventing regulations designed to foster competition. We find that public enterprises often have stronger incentives to pursue these activities than do their private, profit-maximizing counterparts.

Privatization, Information and Incentives

In this paper, the choice between public and private provision of goods and services is considered. In practice, both modes of operation involve significant delegation of authority, and thus appear quite similar in some respects. The argument here is that the main difference between the two mod- concerns the transactions cats faced by the government when attempting to intervene in the delegated production activities. Such intervention is generally less costly under public ownership than under private ownership. The greater ease of intervention under public ownership can have its advantages; but the fact that a promise not to intervene is more credible under private production can also have beneficial incentive effects, The Fundamental Privatization Theorem (analogous to The Fundamental Theorem of Welfare Economics) is presented, providing conditions under which government production cannot improve upon private production. The restrictiveness of these conditions is evaluated.

Mitochondrial DNA Variation and Range Expansion in Western Bean Cutworm (Lepidoptera: Noctuidae): No Evidence for a Recent Population Bottleneck

The western bean cutworm, Striacosta albicosta (Smith) (Lepidoptera: Noctuidae), is a pest of both corn and dry bean crops. At the beginning of the 21st century, the species began to extend its range out of the Great Plains, eastward through the Corn Belt. This rapid range expansion is remarkable because the species distribution had been stable for at least the previous half century, despite the apparent abundance of suitable habitat (i.e., cornfields) immediately to the east. We hypothesized that if the western bean cutworm had to overcome a stable barrier to movement before starting the current range expansion, it probably experienced a genetic bottleneck in doing so. To test this hypothesis, variation in the mitochondrial NADH dehydrogenase one (ND1) gene was studied in populations from Wyoming, Nebraska, and Iowa. No differences in overall genetic diversity or haplotype frequencies indicative of a bottleneck were observed between the recently founded populations in Iowa and the established populations in Wyoming and Nebraska. This result suggests that the sudden loss of an ecological exclusion mechanism, allowing the species to move east in appreciable numbers, is more likely to have triggered the range expansion than the surmounting of an extrinsic barrier to movement. The nature of this mechanism is unknown but might be related to recent changes in corn farming practices and technology

Incentives for Sabotage in Vertically Related Industries

We show that the incentives a vertically integrated supplier may have to disadvantage or "sabotage" the activities of downstream rivals vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation

A cadherin-like protein influences Bacillus thuringiensis Cry1Ab toxicity in the oriental armyworm, Mythimna separata

Cadherins comprise a family of calcium-dependent cell adhesion proteins that act in cell–cell interactions. Cadherin-like proteins (CADs) in midguts of some insects act as receptors that bind some of the toxins produced by the Bacillus thuringiensis (Bt). We cloned a CAD gene associated with larval midguts prepared from Mythimna separata. The full-length cDNA (MsCAD1, GenBank Accession No. JF951432) is 5642 bp, with an open reading frame encoding a 1757 amino acid and characteristics typical of insect CADs. Expression of MsCAD1 is predominantly in midgut tissue, with highest expression in the 3rd- to 6th-instars and lowest in newly hatched larvae. Knocking-downMsCAD1 decreased Cry1Ab susceptibility, indicated by reduced developmental time, increased larval weight and reduced larval mortality. We expressed MsCAD1 in E. coli and recovered the recombinant protein, rMsCAD1, which binds Cry1Ab toxin. Truncation analysis and binding experiments revealed that a contiguous 209-aa, located in CR11 and CR12, is the minimal Cry1Ab binding region. These results demonstrate that MsCAD1 is associated with Cry1Ab toxicity and is one of the Cry1Ab receptors in this insect. The significance of this work lies in identifying MsCAD1 as a Cry1Ab receptor, which helps understand the mechanism of Cry1Ab toxicity and of potential resistance to Bt in M. separata

Employing endogenous access pricing to enhance incentives for efficient upstream operation

Endogenous access pricing (ENAP) is an alternative to the more traditional form of access pricing that sets the access price to reflect the regulator’s estimate of the supplier’s average cost of providing access. Under ENAP, the access price reflects the supplier’s actual average cost of providing access, which varies with realized industry output. We show that in addition to eliminating the need to estimate industry output accurately and avoiding a divergence between upstream revenues and costs, ENAP can enhance the incentive of a vertically integrated producer to minimize its upstream operating cost