Showing papers on "Pooling published in 1994"

Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria

Abstract: Credit contracts play a direct role in pooling risk between households in northern Nigeria. Repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders. The paper develops two models of state-contingent loans. The first is a competitive equilibrium in perfectly enforceable contracts. The second permits imperfect information and equilibrium default. Estimates of both models indicate that quantitatively important state-contingent payments are embedded in these loan transactions, but that a fully efficient risk-pooling equilibrium is not achieved. The research is based on a year-long survey in Zaria, Nigeria conducted by the author.

Optimal Design of Securities under Asymmetric Information

Abstract: A firm must decide what security to sell to raise external capital to finance a profitable investment opportunity. There is ex ante asymmetry of information regarding the probability distribution of cash flow generated by the investment. In this setting, we derive necessary and sufficient conditions for a security to be optimal (uniquely optimal), that is, for pooling at this security to be an (the unique) equilibrium outcome. Using these conditions we show that the debt contract is (uniquely) optimal if and only if cash flows are ordered by (strict) conditional stochastic dominance. Finally, we derive an equivalence relationship between optimal security designs and designs that minimize mispricing.

Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?

Abstract: The majority of privately insured Americans obtain their health insurance through their own or a family member's employment. The rationale for employers to provide health insurance is straightforward. By pooling the risks of individuals, employers can reduce adverse selection and lower administrative expenses. In addition, they benefit from tax laws allowing businesses to deduct their health insurance costs. These advantages of employer provision, however, must be weighed against the distortions they may generate in individual labor market decisions. In particular, health insurance may distort job mobility if employees decide to keep jobs they would rather leave for fear of losing coverage for preexisting conditions,' a possibility that has been termed "job-lock." This paper attempts to quantify the effect of employer-provided health insurance on the labor market mobility of individuals. The link between employer-provided health insurance and

Selective DNA pooling for determination of linkage between a molecular marker and a quantitative trait locus.

Abstract: Selective genotyping is a method to reduce costs in marker-quantitative trait locus (QTL) linkage determination by genotyping only those individuals with extreme, and hence most informative, quantitative trait values. The DNA pooling strategy (termed: "selective DNA pooling") takes this one step further by pooling DNA from the selected individuals at each of the two phenotypic extremes, and basing the test for linkage on marker allele frequencies as estimated from the pooled samples only. This can reduce genotyping costs of marker-QTL linkage determination by up to two orders of magnitude. Theoretical analysis of selective DNA pooling shows that for experiments involving backcross, F2 and half-sib designs, the power of selective DNA pooling for detecting genes with large effect, can be the same as that obtained by individual selective genotyping. Power for detecting genes with small effect, however, was found to decrease strongly with increase in the technical error of estimating allele frequencies in the pooled samples. The effect of technical error, however, can be markedly reduced by replication of technical procedures. It is also shown that a proportion selected of 0.1 at each tail will be appropriate for a wide range of experimental conditions.

Efficient pooling designs for library screening

Abstract: We describe efficient methods for screening clone libraries, based on pooling schemes which we call ``random $k$-sets designs''. In these designs, the pools in which any clone occurs are equally likely to be any possible selection of $k$ from the $v$ pools. The values of $k$ and $v$ can be chosen to optimize desirable properties. Random $k$-sets designs have substantial advantages over alternative pooling schemes: they are efficient, flexible, easy to specify, require fewer pools, and have error-correcting and error-detecting capabilities. In addition, screening can often be achieved in only one pass, thus facilitating automation. For design comparison, we assume a binomial distribution for the number of ``positive'' clones, with parameters $n$, the number of clones, and $c$, the coverage. We propose the expected number of {\em resolved positive} clones---clones which are definitely positive based upon the pool assays---as a criterion for the efficiency of a pooling design. We determine the value of $k$ which is optimal, with respect to this criterion, as a function of $v$, $n$ and $c$. We also describe superior $k$-sets designs called $k$-sets packing designs. As an illustration, we discuss a robotically implemented design for a 2.5-fold-coverage, human chromosome 16 YAC library of $n=1,298$ clones. We also estimate the probability each clone is positive, given the pool-assay data and a model for experimental errors.

Coping with the Loss of Pooling Synergy in Cellular Manufacturing Systems

Abstract: The conversion of a functional layout into a cellular manufacturing system involves the partitioning of several multiserver work centers. The loss of pooling synergy in this process can be significant, and this paper investigates the impact of several measures to overcome the adverse effects on flow time, work-in-process inventory and machine utilization. These can be alleviated to a certain extent through reductions in setup times and lot sizes that has been traditionally emphasized in group technology, but a more concerted effort is required. Analytical models are first utilized to investigate the extent to which these adverse effects can be overcome through 1 reduction in setup time, 2 lot sizing, 3 reduction in the variability of process-times and job arrivals, and, 4 reduction in processing times through productivity improvements, all arising from part family-oriented processing. These insights are verified through a simulation comparison of five cellular manufacturing systems with a functional layout system in which optimal lot sizes, low move times and a part family-oriented scheduling rule are used.

The use of a square array scheme in blood testing.

Abstract: When testing blood samples for the presence of disease, considerable efficiencies may be achieved by pooling samples and testing them as a batch. It is shown that placing the samples in a square array and pooling rows and columns has substantial advantages, particularly in the reduction of false negatives. The commonly used 8 × 12 array is also considered.

On the Biasedness of Forward Foreign Exchange Rates: Irrationality or Risk Premia?

Abstract: In this article, the authors reconsider the K. A. Froot and J. A. Frankel (1989) results on the sources of forward discount bias. They question the economic validity of some estimation restrictions that they impose and, thus, are led to question some of their results. The authors employ a new exchange rate survey database that includes European Monetary System currencies and use univariate and pooling estimation techniques that impose fewer restrictions than those of Froot and Frankel to test their hypotheses. They find that the bias in the forward discount is attributable to both the failure of rational expectations and the existence of time-varying risk premia. Copyright 1994 by University of Chicago Press.

Pooled population parameter from mark-recapture data.

Abstract: The reduced capture history (RCH), compiled from complete capture histories of uniquely marked animals, for a given pooling interval contains the same information as would be obtained from experiments where (i) a single sample lasts the duration of the pooling interval; (ii) an identical batch mark is applied to animals captured in a series of samples carried out during the pooling interval. For stationary populations, biases are calculated for the RCH estimates for all parameters in the Jolly-Seber (J-S) model. The results are verified using simulation. The biases are functions of the survival and capture probabilities and the degree of pooling; they are less than 5% for the total population, birth and survival rates, and probability of capture during the pooling interval if the mortality and capture probabilities do not exceed about 50% per pooling interval. The marked population, marked fraction, and probability of recapture cannot estimated directly by the RCH method but can be obtained iteratively from the bias formulae. The biases in other parameters can be reduced by the same procedure. Alternative estimates are derived that are not detectably biased, for any estimate, for mortality and capture probability up to about 60% per pooling period. The new estimates have higher sample variances than the RCH estimates, but for large populations with high mortalities and capture probabilities the difference is small.

Implicit Pooling Of Workers From Large And Small Firms

Abstract: Risk pools for small employers have become an integral part of proposals for national health care reform and have been implemented by a number of states. These explicit attempts to pool small employers are occurring at the same time that many small-firm employees obtain health insurance through implicit pooling arrangements as the dependent of a policyholder insured by a large firm. We use data from the 1987 National Medical Expenditure Survey to document the extent of implicit pooling arrangements, to examine whether small-firm employees and their dependents are adverse health risks, and to assess the cost implications of pooling small- and large-firm employees and dependents.

Credit Markets and the Welfare Costs of Inflation

Abstract: We construct a simple model in which high inflation imposes welfare costs because it affects the ability of the financial sector to screen between high and low cost producers. Consumers search for a low price and inflation reduces the incentives to search, resulting in an increase in the demand of high cost producers. We show that beyond a certain level of inflation there is a switch from a separating equilibrium to a pooling equilibrium, where financial institutions become unable to distinguish among clients. In this pooling equilibrium a larger share of credit is allocated to less efficient firms.

On the Optimality of Reserve Requirements

Abstract: An implicit rationale for a bank reserve requirement is that a central monetary authority is in a unique position (as "social planner) to impose a "socially superior" outcome to that yielded by a free banking system. We illustrate how this can be true in the context of a simple economy modeled to mimic certain basic characteristics of a monetary economy with banks and agents who trade with one another. Banks exist in our model because by pooling liquidation risks they provide liquidity otherwise unavailable to depositors, which, in turn, provides the incentive - for using deposit claims as the medium of exchange.

Credit Markets and the Welfare Costs of Inflation

Abstract: We construct a simple model in which high inflation imposes welfare costs because it affects the ability of the financial sector to screen between high and low cost producers. Consumers search for a low price and inflation reduces the incentives to search, resulting in an increase in the demand of high cost producers. We show that beyond a certain level of inflation there is a switch from a separating equilibrium to a pooling equilibrium, where financial institutions become unable to distinguish among clients. In this pooling equilibrium a larger share of credit is allocated to less efficient firms.

The impact of a preliminary test for interaction in a 2 × 2 factorial trial

Abstract: Preliminary tests of significance on the crucial assumptions are often done before drawing inferences of primary interest. In a factorial trial, the data may be pooled across the columns or rows for making inferences concerning the efficacy of the drugs {simple effect) in the absence of interaction. Pooling the data has an advantage of higher power due to larger sample size. On the other hand, in the presence of interaction, such pooling may seriously inflate the type I error rate in testing for the simple effect. A preliminary test for interaction is therefore in order. If this preliminary test is not significant at some prespecified level of significance, then pool the data for testing the efficacy of the drugs at a specified α level. Otherwise, use of the corresponding cell means for testing the efficacy of the drugs at the specified α is recommended. This paper demonstrates that this adaptive procedure may seriously inflate the overall type I error rate. Such inflation happens even in the absence of i...

Cost Pooling in Australian Grain Handling: A Common Property Analysis

Abstract: The common property analysis of Rausser, Zusman, and Foster is expanded and applied t Australian grain transportation systems. With a conservative decision rule, a statically inefficient cost pooling system may lead to optimal investment decisions as benefits become pooled. With Ramsey pricing in contrast, losers may veto many investment decisions, so that allocations become 'equitable' but technically inefficient. Efficiency gains from price policy reform may not be achieved unless accompanied by property right reallocation.

Robust Min-max Decisions with Rival Models

Abstract: In the presence of rival models of the same system, an optimal policy can be computed to take account of all the models A min-max, worst-case design, problem is an extreme case of the ordinary pooling of the models for policy optimization It is shown that, due to its noninferiority, the min-max strategy corresponds to the robust policy If such a robust policy happens to have too high a political cost to be implemented, an alternative pooling can be formulated using the robust pooling as a guide

Pooling and other designs for analysing laboratory samples more efficiently

Abstract: June, 1989 Revised January 1993 May 1993 August 1993 Statistical design procedures exist for retaining anonymity of respondent's answers to sensitive, incriminating, or embarrassing characteristics, for pooling samples in disease prevalence and drug usage studies, and for efficient handling of overloads of analyses in analytical laboratories. They allow results not obtainable by other methods, decrease costs of sample laboratory analyses, allow for timely results, and in general, increase the efficiency and reliability of investigations. Payoffs can be substantial as illustrated with several samples. Sampling procedures and designs allowing estimation of population parameters while retaining anonymity for the respondent are required for many situations in survey sampling. Three such designs accomplishing this are randomized response, block total response, and randomized block total response. Sampling designs which can greatly reduce the number of laboratory analyses for a survey, appear little used and even unknown, e.g., the 1943 Dorfman group testing procedure. This particular group testing procedure as well as other methods of grouping or pooling are discussed to some extent. Three specific surveillance plans are briefly described. Sequential analyses of samples from a survey may be appropriate for some surveys and should be used. The examples and procedures described demonstrate the need for considering and perhaps using results from all areas of statistical design.

Risk sharing in the pricing of payment services by banks

Abstract: The banking industry has traditionally covered a large part of its operating costs by net interest earnings, based on the spread between deposit and lending rates.This reflects the common practice of underpricing various services provided to customers, especially depositors.The purpose of this paper is to present an explanation to this phenomenon by analyzing the pricing of transaction deposit accounts as arrangements for pooling transaction cost uncertainty among depositors.It turns out that, when transactions are stochastic, and depositors are risk averse, there is an incentive to minimize explicit transaction charges.Moral hazard may explain why some service charges are applied, however.

Pooling. Pleidooi voor een model

Abstract: Shows the value of a model of a commonly encountered structure of indirect exchange, ie, pooling. Although the rules governing contributions & distribution may vary considerably in different systems, it is hypothesized that potential participants always make two comparisons: (1) between their own costs & rewards; & (2) between the equity of ratios of costs & rewards. Costs & rewards are not limited to the material realm. The cultural as well as the structural embeddedness in- & outside the pooling system determines which factors are considered as a cost or reward, whether reciprocity should be expected in the short term, & what is considered to be fair. It is concluded that the model is helpful not because of its predictive capacity but because it helps the sociologist to ask relevant questions. A Western & a non-Western example are provided. 2 Tables, 48 References. Adapted from the source document.

The effect of costly risk bearing on insurers' supply decisions

Abstract: Efficient contracts for sharing risk will allocate risk according to comparative advantage. When risks meet the typical criteria for insurability, in particular independence, the comparative advantage is straightforward and insurers are able to diversify risk by pooling together many policyholders. But this comparative advantage is established only in the event insureds have a low correlation. Earthquakes do not fit this description. The high correlations between the claims on the insurer's policies will (in the limit) equalize the costs of risk bearing for the insurer and insured. But the insurer's comparative advantage is not necessarily entirely removed, since correlations are not perfect, but there is a limit to the insurers' ability to diversify the risk. This paper considers insurance markets for earthquake risk and how comparative advantage in risk bearing can explain the amount of business individual insurers write. The respective abilities of insurers to write this risk depend on the characteristics of their entire portfolio as well as on financial features that influence the costs of risk bearing. Several recent contributions have shown why risk is costly to corporations such as insurers. The costs of risk arise from tax convexity, principal agent relationships within the firm, and the costs of financial distress. We will show how these types of features jointly determine the capacity of insurers to write earthquake insurance. We collect these arguments together in a simple equilibrium model of insurance. From this we derive and estimate a cross sectional model of earthquake insurance which emphasizes the differing capacity of insurers to write this line of business.

Loan Size and Credit Rationing Under Asymmetric Information

Abstract: In this paper we analyze the effects of adverse selection due to asymmetric information on the optimizing behavior of risk neutral firms and banks in a competitive loan market. Realized film returns have the monotone likelihood ratio property (MLRP) with respect to quality, in the sense of Milgrom (1981). This property encompasses the assumptions which characterize previous models such as Stiglitz and Weiss (1981) and De Meza and Webb (1987), allowing for a more general framework. Moreover, similary to Milde and Riley (1988), the present model has loans of variable size, as opposed to the fixed loan size of Stiglitz and Weiss and De Meza and Webb. The references to a parameter of “organizational complexity”of the firm, defined by the prevailing type of economies of scale and costs, and to a Wilson (1977) construction of the contracting game, whereby uninformed lenders move first in a three-stage pure strategy game, differentiate the present model from Milde and Riley's with respect to two main elements: (i) while Milde and Riley's model is based on three different and unrelated cases, our model is able to subsume the various cases within a unified framework; (ii) while Milde and Riley's assumptions rule out the possibility of pooling equilibria, the Wilson construction in our model entails the possibility of both separating and pooling equilibria. In particular, pooling equilibria obtain whenever applicants of different quality have indifference curves so similar that banks are unable to screen out their projects. This result strengthens the possibility of credit rationing even in the presence of signaling through the size of the loan. Both separating and pooling equilibria entail the possibility of type I” credit rationing of given quality types.