The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance

Property-liability insurance is distributed by two different types of firms, those that distribute their product through independent agents, who represent more than one insurer,and direct writing insurers that distribute insurance through exclusive agents, who represent only one insurer. This paper analyzes the reasons for the long term coexistence of the independent agency and direct writing distribution systems. Two primary hypotheses explain the coexistence of independent and exclusive agents. The market imperfections hypothesis suggests that firms that use independent agents survive while providing essentially the same service as firms using exclusive agents because of market imperfections such as price regulation, slow diffusion of information in insurance markets, or search costs that permit inefficient firms to survive alongside efficient firms. Efficient firms are expected to earn super-normal risk-adjusted profits, while inefficient firms will earn risk-adjusted profits closer to normal levels. The product quality hypothesis suggests that higher costs of independent agents represent unobserved differences in product quality or service intensity, such as the providing of additional customer assistance with claims settlement,offering a greater variety of product choice sand reducing policyholder search costs. This hypothesis predicts normal risk-adjusted profits for both independent and exclusive agency firms. Because product quality in insurance is essentially unobserved, researchers have been unable to reach consensus on whether the market imperfections hypothesis or the product quality hypothesis is more consistent with the observed cost data. This lack of consensus leaves open the economic question of whether the market works well in solving the problem of minimizing product distribution costs and leaves unresolved the policy issue of whether marketing costs in property-liability insurance are excessive and perhaps should receive regulatory attention. The authors propose a new methodology for distinguishing between market imperfection sand product quality using frontier efficiency methods. They estimate both profit efficiency and cost efficiency for a sample of independent and exclusive agency insurers. Measuring profit efficiency helps to identify unobserved product quality differences because customers should be willing to pay extra for higher quality. This approach allows for the possibility that some firms may incur additional costs providing superior service and be compensated for these costs through higher revenues. Profit efficiency also implicitly incorporates the qualities floss control and risk management services,since insurers that more effectively control losses and manage risk should have higher average risk-adjusted profits but not necessarily lower costs than less effective insurers. The empirical results confirm that independent agency firms have higher costs on average than do direct writers. The principal finding of the study is that most of the average differential between the two groups of firms disappears in the profit function analysis. This is a robust result that holds both in the authors tables of averages and in the regression analysis and applies to both the standard and non-standard profit functions. Based on averages, the profit efficiency differential is at most one-third as large as the profit efficiency differential.Based on the regression analysis, the profit inefficiency differential is at most one-fourth as large as the cost inefficiency differential,and the profit inefficiency differential is not statistically significant in the more fully specified models that control for size,organizational form and business mix. The results provide strong support for the product quality hypothesis and do not support the market imperfections hypothesis. The higher costs of independent agents appear to be due almost entirely to the provision of higher quality services, which are compensated for by additional revenues. A significant public policy implication is that regulatory decisions should not be based on costs alone. The authors findings imply that marketing cost differentials among insurers are mostly attributable to service differentials rather than to inefficiency and therefore do not represent social costs. The profit inefficiency results show that there is room for improvement in both the independent and direct writing segments of the industry. However, facilitating competition is likely to be a more effective approach to increasing efficiency than restrictive price regulation.

Contingency power for small turboshaft engines using water injection into turbine cooling air

Because of one engine inoperative requirements, together with hot-gas reingestion and hot day, high altitude takeoff situations, power augmentation for multiengine rotorcraft has always been of critical interest. However, power augmentation using overtemperature at the turbine inlet will shorten turbine life unless a method of limiting thermal and mechanical stresses is found. A possible solution involves allowing the turbine inlet temperature to rise to augment power while injecting water into the turbine cooling air to limit hot-section metal temperatures. An experimental water injection device was installed in an engine and successfully tested. Although concern for unprotected subcomponents in the engine hot section prevented demonstration of the technique's maximum potential, it was still possible to demonstrate increases in power while maintaining nearly constant turbine rotor blade temperature

Numerical simulations of generic singuarities

Numerical simulations of the approach to the singularity in vacuum spacetimes are presented here. The spacetimes examined have no symmetries and can be regarded as representing the general behavior of singularities. It is found that the singularity is spacelike and that as it is approached, the spacetime dynamics becomes local and oscillatory.Comment: typos correcte

High velocity spikes in Gowdy spacetimes

We study the behavior of spiky features in Gowdy spacetimes. Spikes with velocity initially high are, generally, driven to low velocity. Let n be any integer greater than or equal to 1. If the initial velocity of an upward pointing spike is between 4n-3 and 4n-1 the spike persists with final velocity between 1 and 2, while if the initial velocity is between 4n-1 and 4n+1, the spiky feature eventually disappears. For downward pointing spikes the analogous rule is that spikes with initial velocity between 4n-4 and 4n-2 persist with final velocity between 0 and 1, while spikes with initial velocity between 4n-2 and 4n eventually disappear.Comment: discussion of constraints added. Accepted for publication in Phys. Rev.

Bootstrapping One-Loop QCD Amplitudes with General Helicities

The recently developed on-shell bootstrap for computing one-loop amplitudes in non-supersymmetric theories such as QCD combines the unitarity method with loop-level on-shell recursion. For generic helicity configurations, the recursion relations may involve undetermined contributions from non-standard complex singularities or from large values of the shift parameter. Here we develop a strategy for sidestepping difficulties through use of pairs of recursion relations. To illustrate the strategy, we present sets of recursion relations needed for obtaining n-gluon amplitudes in QCD. We give a recursive solution for the one-loop n-gluon QCD amplitudes with three or four color-adjacent gluons of negative helicity and the remaining ones of positive helicity. We provide an explicit analytic formula for the QCD amplitude A_{6;1}(1^-,2^-,3^-,4^+,5^+,6^+), as well as numerical results for A_{7;1}(1^-,2^-,3^-,4^+,5^+,6^+,7^+), A_{8;1}(1^-,2^-,3^-,4^+,5^+,6^+,7^+,8^+), and A_{8;1}(1^-,2^-,3^-,4^-,5^+,6^+,7^+,8^+). We expect the on-shell bootstrap approach to have widespread applications to phenomenological studies at colliders.Comment: 77 pages, 17 figures; v2, corrected minor typos in text and small equation

Conglomeration Versus Strategic Focus: Evidence from the Insurance Industry

We provide evidence on the validity of the conglomeration hypothesis versus the strategic focus hypothesis for financial institutions using data on U.S. insurance companies. We distinguish between the hypotheses using profit scope economies, which measures the relative efficiency of joint versus specialized production, taking both costs and revenues into account. The results suggest that the conglomeration hypothesis dominates for some types of financial service providers and the strategic focus hypothesis dominates for other types. This may explain the empirical puzzle of why joint producers and specialists both appear to be competitively viable in the long run.

High-fructose corn-syrup-sweetened beverage intake increases 5-hour breast milk fructose concentrations in lactating women

This study determined the effects of consuming a high-fructose corn syrup (HFCS)-sweetened beverage on breast milk fructose, glucose, and lactose concentrations in lactating women. At six weeks postpartum, lactating mothers (n = 41) were randomized to a crossover study to consume a commercially available HFCS-sweetened beverage or artificially sweetened control beverage. At each session, mothers pumped a complete breast milk expression every hour for six consecutive hours. The baseline fasting concentrations of breast milk fructose, glucose, and lactose were 5.0 ± 1.3 µg/mL, 0.6 ± 0.3 mg/mL, and 6.8 ± 1.6 g/dL, respectively. The changes over time in breast milk sugars were significant only for fructose (treatment × time, p < 0.01). Post hoc comparisons showed the HFCS-sweetened beverage vs. control beverage increased breast milk fructose at 120 min (8.8 ± 2.1 vs. 5.3 ± 1.9 µg/mL), 180 min (9.4 ± 1.9 vs. 5.2 ± 2.2 µg/mL), 240 min (7.8 ± 1.7 vs. 5.1 ± 1.9 µg/mL), and 300 min (6.9 ± 1.4 vs. 4.9 ± 1.9 µg/mL) (all p < 0.05). The mean incremental area under the curve for breast milk fructose was also different between treatments (14.7 ± 1.2 vs. −2.60 ± 1.2 µg/mL × 360 min, p < 0.01). There was no treatment × time interaction for breast milk glucose or lactose. Our data suggest that the consumption of an HFCS-sweetened beverage increased breast milk fructose concentrations, which remained elevated up to five hours post-consumption

Harmonic coordinate method for simulating generic singularities

This paper presents both a numerical method for general relativity and an application of that method. The method involves the use of harmonic coordinates in a 3+1 code to evolve the Einstein equations with scalar field matter. In such coordinates, the terms in Einstein's equations with the highest number of derivatives take a form similar to that of the wave equation. The application is an exploration of the generic approach to the singularity for this type of matter. The preliminary results indicate that the dynamics as one approaches the singularity is locally the dynamics of the Kasner spacetimes.Comment: 5 pages, 4 figures, Revtex, discussion expanded, references adde

On-Shell Unitarity Bootstrap for QCD Amplitudes

We describe the recently developed on-shell bootstrap for computing one-loop amplitudes in non-supersymmetric theories such as QCD. The method combines the unitarity method with loop-level on-shell recursion. The unitarity method is used to compute cut-containing parts of amplitudes, and on-shell recursion is used for the remaining rational terms.Comment: 10 pages, 9 figures, write-up of talks given by Z. Bern and D. A. Kosower at Loops & Legs 2006, Eisenach, Germany; v2: added referenc

New Algorithm for Mixmaster Dynamics

We present a new numerical algorithm for evolving the Mixmaster spacetimes. By using symplectic integration techniques to take advantage of the exact Taub solution for the scattering between asymptotic Kasner regimes, we evolve these spacetimes with higher accuracy using much larger time steps than previously possible. The longer Mixmaster evolution thus allowed enables detailed comparison with the Belinskii, Khalatnikov, Lifshitz (BKL) approximate Mixmaster dynamics. In particular, we show that errors between the BKL prediction and the measured parameters early in the simulation can be eliminated by relaxing the BKL assumptions to yield an improved map. The improved map has different predictions for vacuum Bianchi Type IX and magnetic Bianchi Type VI$_0$ Mixmaster models which are clearly matched in the simulation.Comment: 12 pages, Revtex, 4 eps figure