CER-ETH Research Seminar, Fall Term 2014

Speakers

Humberto Llavador

Abstract not available

Kurt Richard Brekke  

This paper studies the effects of price regulation and parallel imports in the onpatent pharmaceutical market. In a theory model where the producer price is subject to bargaining between the brand-name producer and a distributor, we show that the effects of price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of
the distributor, price regulation counteracts this effect and may even be profitable for the producer. We test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over four years (2004-7). We show that stricter price regulation reduces competition from parallel imports, and has no (strictly negative) effect on producer profits in the
presence (absence) of parallel imports. Our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports.

Guillaume Cheikbossian

This paper provides a political economy analysis of (de)centralization when local public goods -- with spillovers effects -- can be substitutes or complements. Depending on the degree of complementarity between local public goods, median voters strategically delegate policy to either `conservative' or to `liberal' representatives under decentralized decision-making. In the first case, it accentuates the free-rider problem in public good provision, while it mitigates it in the second case. Under centralized decision-making, the process of strategic delegation results in either too low or too much public spending, with the outcome crucially depending on the sharing of the costs of local public spending relative to the size of the spillover effects. Hence, with a common financing rule, centralization is welfare improving if and only if both public good externalities and the degree of complementarity between local public goods are both relatively large.

Claudia Neri

We propose a behavioral theory of preference for decision rights, driven by preference for freedom, power, or non-interference, which can lead subjects to value decision rights intrinsically, i.e., beyond the expected utility associated with them. We conduct a novel laboratory experiment in which the effect of each preference is distinguished. We find that the intrinsic value of decision rights is driven more strongly by preference for non-interference than by preference for freedom or power. This result suggests that individuals value decision rights not because of the actual decision-making process but rather because they dislike others interfering in their outcomes.

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Jean-Marc Tallon

We provide possibility results on the aggregation of beliefs and tastes for Monotone, Bernoullian and Archimedian preferences of Cerreia-Vioglio, Ghirardato, Maccheroni, Marinacci, and Siniscalchi (2011). We propose a new axiom, Unambiguous Pareto Dominance, which requires that if the unambiguous part of individuals’ preferences over a pair of acts agree, then society should follow them. We characterize the resulting social preferences and show that it is enough that individuals share a prior to allow non dictatorial aggregation.
A further weakening of this axiom on common-taste acts, where cardinal preferences are identical, is also characterized. It gives rise to a set of relevant priors at the social level that can be any subset of the convex hull of the individuals’ sets of relevant priors. We then apply these general results to the Maxmin Expected Utility model, the Choquet Expected Utility model and the Smooth Ambiguity model. We end with a characterization of the aggregation of ambiguity attitudes.

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NameThibalut Gajdos

We propose an experimental approach to investigate the demand for social health insurance. We implement a competition between an individual and a mutual insurance system, which permits inequality reduction and risk pooling. We introduce three
kinds of sources of inequality: income, vulnerability, and prevention. We show that subjects are willing to pay to reduce inequalities and to subsidize the least well-off, and that the sources of inequality matter in their decision. We find as well that their willingness to pay is influenced by informational framings, be it the contextualization of the experiment or information on transfers implemented. Our findings suggest that
citizens' demand for equality of opportunity in health might explain the existence and scope of voluntary mutual health insurance.

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