Capabilities and Equality of Health I

The concept of capabilities, introduced originally by Sen with the aim to provide a better basis for the theory of inequality, has inspired many researchers but has not found any simple formal representation which might be instrumental in the construction of a comprehensive theory of equality. In the present paper, we present a formalization of the concept of capabilities based on Lancasterian characteristics, whereby a functioning of an individual is a method for transforming an initial position to a final outcome. In this context, we investigate whether preferences over capabilities as sets of functionings can be rationalized by maximization of a suitable utility function over the set of functionings. Such a rationalization turns out to be possible only in cases which must be considered exceptional and which do not allow for interesting applications of the capability approach to questions of health or equality. The conclusion which can be obtained from the predominantly negative results is that a formal description of capabilities much involve ideas which go beyond the simple representation as a family of choice sets.capabilities; characteristics; equality of health

Capabilities and Equality of Health II: Capabilities as Options

The concept of capabilities, introduced originally by Sen, has inspired many researchers but has not found any simple formal representation which might be instrumental in the construction of a comprehensive theory of equality. In a previous paper (Keiding, 2005), we investigated whether preferences over capabilities as sets of functionings can be rationalized by maximization of a suitable utility function over the set of functionings. Such a rationalization turned out to be possible only in cases which must be considered exceptional and which do not allowfor interesting applications of the capability approach to questions of health or equality. In the present paper we extend the notion of rationalizing orderings of capabilities to a dynamical context, in the sense that the utility function is not yet revealed to the individual at the time when the capabilities are ordered. It turns out that orderings which are in accordance with such probabilistic utility assignments can be characterized by a smaller set of the axioms previously considered.Capabilities; characteristics; equality of health

On the Foundation of Guidelines for Health Economic Evaluation

In recent years, there has been increased interest in setting up guidelines for carrying out cost-effectiveness analysis of medical interventions, and some such guidelines have indeed been established. In the paper, we present a model of information retrievement and use in which we can study the role of guidelines. The main result, which is a version of the well-known theorem of Blackwell (1948), shows that in cases where there are sufficiently many decisions to be made on the basis of the information obtained, there can be no objective ranking of methods, except the trivial one stating that more information is better than less. The consequence is that guidelines, and the very detailed version known as the reference case approach, may have administrative advantages but can be harmful when considered as an aid towards better decisions.cost-effectiveness; guidelines; Blackwell’s theorem

Interaction sheaves on continuous domains

We introduce a description of the power structure which is inherent in a strategic game form using the concept of an interaction sheaf. The latter assigns to each open set of outcomes a set of interaction arrays, specifying the changes that coalitions can make if outcome belongs to this open set. The interaction sheaf generalizes the notion of effectivity functions which has been widely used in implementation theory, taking into consideration that changes in outcome may be sustained not only by single coalitions but possibly by several coalitions, depending on the underlying strategy choices. Also, it allows us to consider game forms with not necessarily finite sets of outcomes, generalizing the results on solvability of game forms obtained in the finite case in Abdou and Keiding (2003).Nash equilibrium; strong equilibrium; solvability; effectivity; acyclicity

On the Continuity of Representations of Effectivity Functions.

An effectivity function assigns to each coalition of individuals in a society a family of subsets of alternatives such that the coalition can force the outcome of society’s choice to be a member of each of the subsets separately. A representation of an effectivity function is a game form with the same power structure as that speci?ed by the effectivity function. In the present paper we investigate the continuity properties of the outcome functions of such representation. It is shown that while it is not in general possible to find continuous representations, there are important subfamilies of effectivity functions for which continuous representations exist. Moreover, it is found that in the study of continuous representations one may practically restrict attention to effectivity functions on the Cantor set. Here it is found that general effectivity functions have representations with lower or upper semicontinuous outcome function.

Regulated Competition under Increasing Returns to Scale

This paper proposes a mechanism for the regulation of firms in the context of asymmetric information with the aim to induce firms to report its private information truthfully and to save information rents. Baron and Myerson (1982) have considered this problem and derived an optimal policy for regulating a monopolist with unknown costs. They show that it was possible to create a regulatory mechanism that induced the firm to report its private information truthfully. To secure this, a part of the mechanism is to pay the firm a subsidy. This article presents a regulatory mechanism which explores competition in the context of an industry characterized by increasing returns to scale. In contrast to the model in this article, the Baron and Myerson model doesn’t consider increasing returns to scale. In equilibrium each firm chooses to report truthfully without receiving any subsidy. However, the use of competition gives rise to an efficiency lost.

Interaction Sheaves on Continuous Domains

We introduce a description of the power structure which is inherent in a strategic game form using the concept of an interaction sheaf. The latter assigns to each open set of outcomes a set of interaction arrays, specifying the changes that coalitions can make if outcome belongs to this open set. The interaction sheaf generalizes the notion of effectivity functions which has been widely used in implementation theory, taking into consideration that changes in outcome may be sustained not only by single coalitions but possibly by several coalitions, depending on the underlying strategy choices. Also, it with not necessarily finite sets of outcomes, generalizing the results on solvability of game forms obtained in the finite case in Abdou and Keiding (2003).Nash equilibrium; strong equilibrium; solvability; effectivity; acyclicity

How Likely Is Factor Price Equalization?

The idea of treating factor price equalization as a situation, where the distribution of factors among countries is compatible with an equilibrium in an integrated world economy, has been refined to give the so-called lens condition for factor price equalization. In this paper, we show that the lens condition may be used to give estimates for the probability of factor price equalization when factors are distributed randomly among countries and, in addition, the techologies are sampled according to a given probability distribution. The estimates indicate that factor price equalization may occur less often than intuitively conceived.international trade; Factor Price Equalization; lens condition

Rational Fear of Floating: A Simple Model of Exchange Rates and Income Distribution

We consider a simple two-country model, where each country produces a consumption good from a single input. Production takes time, and the model is considered over two consecutive periods. There are three categories of economic agents, namely factor owners, entrepreneurs, and financial intermediaries. The latter offers credits to entrepreneurs and are funded by sale internationally transferable bonds. We assume that the national credit markets are monopolistic but that other markets are competitive. Exchange rate policy is introduced in two different ways, either as a market intervention by a government, sustained by intervention in the commodity market, and, more realistically, as a policy commitment by the monetary authorities, which in equilibrium is taken into consideration by the financial intermediary. The results of the simple model show that an increase in the value of the domestic currency from an equilibrium position will in most cases decrease aggregate welfare of the country, but it will improve welfare of the financial intermediaries. Thus, in the simple framework of our model, a specific sector – and one with a considerable influence on policy choices – stands to gain from this exchange rate policy.fear of floating; income distribution; financial intermediaries