Compared with non-union workers, union workers take more of their compensation in the form of insurance. This may be because unions choose democratically, and democratic choice mitigates adverse selection in group insurance. Relative to individually-purchased insurance, we show that group insurance chosen by an ideal profit-maximizing employer can be worse for every employee, while group insurance chosen democratically can be much better. The reason is that democracy can fail to represent the preferences of almost half the group.

According to agency theory, agents base their economic decisions on self-interests when adverse selection conditions exist. However, cognitive moral development theory predicts that ethics/morals may influence decision-makers not to behave egoistically. Rutledge and Karim, 173-184) find both the moral reasoning level of the managers and an adverse selection condition affect a manager's project evaluation decisions significantly. Since prior studies have shown that national culture might influence the application of agency theory in project evaluation, this current study (...) uses a different moral development measurement to reexamine Rutledge and Karim's hypotheses in another culture. A total of 73 Taiwanese executive MBA students with an average of 12.17 years work experience participated in this study. We found that both moral development level and adverse selection conditions significantly affect managers' project continuance decisions. The interaction effect of these two factors indicates that, when adverse selection conditions exist, participants with a high level of moral development exhibit less of a tendency to continue an unprofitable project than those with a low level of moral development. With subjects from a different culture, our results confirm the findings of Rutldege and Karim. That is, the effects of moral development and adverse selection conditions on managers' project continuance decisions are robust and can be generalized to different cultures. Implications of the findings of this study to multinational firms are also discussed. (shrink)

The debate on whether insurance companies should be allowed to use results of individuals’ genetic tests for underwriting purposes has been both lively and increasingly relevant over the past two decades. Yet there appears to be no widely agreed upon resolution regarding appropriate and effective regulation. There exists today a gamut of recommendations and actual practices addressing this phenomenon ranging from laissez-faire to voluntary industry moratoria to strict legal prohibition. One obvious reason for such a variance in views and approaches (...) is that there are competing bases for evaluating the outcomes of restricting insurers’ use of such information. For example, an outright ban on the use of genetic test results may seem the best method for protecting against unfair discrimination, while allowing their use may seem to be the best way to foster efficiency in the market for insurance. However, there is also a lack of understanding about how restricting the use of genetic information would play out in the market through the so-called phenomenon of adverse selection. Using economic analysis, we discuss how the type of adverse selection that occurs in insurance markets affects various arguments both in favour and against an outright ban on insurers’ use of genetic tests for pricing insurance. We review arguments based on moral principles . Practical concerns from the insurance industry based on actuarial principles and economic efficiency are also compared. Each perspective is shown to lead to a range of conflicting recommendations about how genetic information should be regulated and these conclusions depend critically on whether one conducts the analysis from the ex ante temporal perspective , from the interim temporal perspective , or from the ex post temporal perspective. (shrink)

According to agency theory, agents base their economic decisions on self-interests when adverse selection conditions exist. However, cognitive moral development theory predicts that ethics/morals may influence decision-makers not to behave egoistically. Rutledge and Karim (1999; Accounting, Organizations and Society 24(2), 173–184) find both the moral reasoning level of the managers and an adverse selection condition affect a manager’s project evaluation decisions significantly. Since prior studies have shown that national␣culture might influence the application of agency theory in (...) project evaluation, this current study uses a different moral development measurement to reexamine Rutledge and Karim’s hypotheses in another culture. A total of 73 Taiwanese executive MBA students with an average of 12.17 years work experience participated in this study. We found that both moral development level and adverse selection conditions significantly affect managers’ project continuance decisions. The interaction effect of these two factors indicates that, when adverse selection conditions exist, participants with a high level of moral development exhibit less of a tendency to continue an unprofitable project than those with a low level of moral development. With subjects from a different culture, our results confirm the findings of Rutldege and Karim. That is, the effects of moral development and adverse selection conditions on managers’ project continuance decisions are robust and can be generalized to different cultures. Implications of the findings of this study to multinational firms are also discussed. (shrink)

This study investigated the effect of ACEs and COVID-19 on grit and whether this effect is mediated by mindfulness. Although current scholarship has found that adverse childhood experiences have harmful consequences to individuals across the life span, less is known about the relationship between ACEs and grit. Grit is predictive of educational success and subjective wellbeing. A cross-sectional online survey administered to junior and senior students from 12 universities spread across China was conducted from September 20, 2020 to October (...) 5, 2020. The universities were selected from geographically diverse regions of China to ensure a diverse sample. We received 1,871 completed responses from 2,229 invited students. The survey response rate was 83.9%. The results indicated that ACEs had significantly negative effects on grit, while mindfulness had significantly positive effects on grit. Once controlling for level of mindfulness, the effects of ACEs on grit largely reduced and became insignificant. The findings of this research indicate that mindfulness has a significant mediational effect on the relation between ACEs and grit and call for mindfulness-based interventions for enhancing grit for the population at risks. (shrink)

Anti-selection occurs when information asymmetry exists between insurers and applicants. When an applicant knows they are at high risk of loss, but the insurer does not, the applicant may try to use this knowledge differential to secure insurance at a lower premium that does not match risk.

Capitalizing on a 15-year longitudinal dataset of 9–12 years old children in rural China, this study adopts a life course perspective and analyzes cumulative childhood adversity and its associations with mental health problems from childhood to adulthood. Four domains of childhood life are selected to construct cumulative childhood adversity: socioeconomic hardship, family disruption, physical issue, and academic setback. Overall, cumulative childhood adversity significantly associates with children’s internalizing and externalizing problems as well as adults’ depression and self-esteem. However, cumulative childhood adversity (...) has no significant relationship with internalizing and externalizing problems in adolescence. Furthermore, different domains of childhood adversity matter differently for mental health problems in different life stages. Physical issue and academic setback have the strongest association with internalizing and externalizing problems in childhood, while only socioeconomic hardship has a significant relationship with depression and self-esteem in adulthood. The relationship between cumulative childhood adversity and adult mental health problems is fully mediated by educational attainment. Finally, there is no gender difference in either the occurrence of cumulative childhood adversity or the association between cumulative childhood adversity and mental health problems. (shrink)

The coastal zone of Bangladesh is endowed with dynamic ‘Terrestrial’ and ‘Coastal and Marine ecosystem’. The zone confronts with declined environmental quality owing to unethical anthropogenic interventions. Few studies regarding ethical attitudes of local communities to conserve the coast were conducted earlier. Two objectives, such as (i) heavy metal concentration, and (ii) physio-chemical quality of sample soil and water were selected to reveal the environmental state of study area. Five heavy metals like- Cadmium, Copper, Iron, Lead, and Zinc; and four (...) physio-chemical parameters such as, the pH, Electrical Conductivity, Temperature, and Turbidity of sample soil and water were measured. The average concentration of Pb in soil is 10 times higher than world average (0.03 mg/g), while Cd concentration in soil is two times more than world average (0.11 mg/L). The concentration of Fe at Inani beach water is 1.54 mg/g more than world average (3.4 mg/g). The physio-chemical parameters are within standard range. Unethical discharge of toxic effluents from shrimp hatcheries, and municipal garbage are main sources of pollution, which ensue into environmental degradations. Concentration of five heavy metals and Calcium Carbonate (CaCO3) in sample mollusk shells exhibit biodiversity deterioration. The mollusk shells from Inani beach contains 0.04 mg/L Cd,0.08 mg/L Cu, 0.42 mg/L Fe, 0.38 mg/L Pb, and 0.07 mg/L Zn. The CaCO3 content in mollusk shells at Inani beach is 49.5%, which indicates the degradation of the mollusks, as shells normally are made with 95% - 97% Calcium Carbonate. Hence, the Department of Environment (DOE), Bangladesh (GoB) declared the area as an ‘Ecologically Critical Area’ (ECA). The concerned stakeholders, like- CPP volunteers and officials, Forest Division, Fisheries Research Institute, Bangladesh Water Development Board, Union Chairman and Journalists of Cox’s Bazar recommended insertion of moral values among local stakeholders through trainings, motivational lectures, demonstrations and dramas, as well as, incorporation of lessons about consequences of unethical activities upon geo-environment into text books. Though least practice has been found regarding moral values during survey, the present research advocates in developing ‘Knowledge pool’ about coastal environment, creating awareness, and developing moral ethics among the local, regional and national stakeholders. (shrink)

Corneal transplantation is the most common form of organ transplantation performed globally. However, of all organs, eyes have the highest rate of refusal of donation. This study explored the reasons why individuals decide whether or not to donate corneas. Twenty-one individuals were interviewed who had made a donation decision (13 refused corneal donation and eight consented). Analysis was performed using Grounded Theory. Refusal of corneal donation was related to concerns about disfigurement and the role of eyes in memory and communication. (...) The request for donation therefore raised concerns about a potential adverse change in the ongoing relationship with the deceased, even in death. For those who refused donation, these concerns overshadowed awareness of need or benefit of transplantation. Adjusting the donation message to be more congruent with the real, lived experience of corneal donation may to some extent “prepare” individuals when the donation question is raised. (shrink)

BackgroundTitles and abstracts are the most read sections of biomedical papers. It is therefore important that abstracts transparently report both the beneficial and adverse effects of health care interventions and do not mislead the reader. Misleading reporting, interpretation, or extrapolation of study results is called “spin”. In this study, we will assess whether adverse effects of orthodontic interventions were reported or considered in the abstracts of both Cochrane and non-Cochrane reviews and whether spin was identified and what type (...) of spin.MethodsEligibility criteria were defined for the type of study designs, participants, interventions, outcomes, and settings. We will include systematic reviews of clinical orthodontic interventions published in the five leading orthodontic journals and in the Cochrane Database. Empty reviews will be excluded. We will manually search eligible reviews published between 1 August 2009 and 31 July 2019. Data collection forms were developed a priori. All study selection and data extraction procedures will be conducted by two reviewers independently. Our main outcomes will be the prevalence of reported or considered adverse effects of orthodontic interventions in the abstract of systematic reviews and the prevalence of “spin” related to these adverse effects. We will also record the prevalence of three subtypes of spin, i.e., misleading reporting, misleading interpretation, and misleading extrapolation-related spin. All statistics will be calculated for the following groups: (1) all journals individually, (2) all journals together, and (3) the five leading orthodontic journals and the Cochrane Database of Systematic Reviews separately. Generalized linear models will be developed to compare the various groups.DiscussionWe expect that our results will raise the awareness of the importance of reporting and considering of adverse effects and the presence of the phenomenon of spin related to these effects in abstracts of systematic reviews of orthodontic interventions. This is important, because an incomplete and inadequate reporting, interpretation, or extrapolation of findings on adverse effects in abstracts of systematic reviews can mislead readers and could lead to inadequate clinical practice. Our findings could result in policy implications for making judgments about the acceptance for publication of systematic reviews of orthodontic interventions. (shrink)

PurposeThis paper is an exploratory study to investigate possible remedial measures accounting for a relatively favorable prognosis of health sector workers who have experienced physical WPV in Zhejiang province, China.MethodsFollowing a proportionate stratified sampling strategy, five tertiary hospitals, eight secondary hospitals, and thirty-two primary care facilities were conveniently selected. Among 4,862 valid respondents out of 6,089 self-conducted questionnaires, 224 health sector workers who have been directly exposed to physical WPV in the past year were included in the present study.ResultsThe present (...) study has three major findings: Victims’ satisfaction with the resolution of the physical WPV conflict was directly associated with the favorable prognosis. Taking days off from work after the violence can promote victims’ satisfaction with the resolution of the physical WPV conflict. Knowing that relevant departments investigated the case can promote victims’ satisfaction with the resolution of the physical WPV conflict.ConclusionWe propose a combined gesture of “offering adequate days off work after physical WPV” and “every physical violence must be investigated” that should be taken by all medical institutions in China. Health sector workers who get involved in physical WPV incidents should prioritize their safety and avoid any behavior that may intensify the conflicts. (shrink)

Industrial development in recent decades has led to using information and communication technologies to support personnel selection processes. One of the most notable examples is game-related assessments, supposedly as accurate as conventional tests but which generate better applicant reactions and reduce the likelihood of adverse impact and faking. However, such claims still lack scientific support. Given practitioners’ increasing use of GRA, this article reviews the scientific literature on gamification applied to personnel selection to determine whether the current (...) state of the art supports their use in professional practice and identify specific aspects on which future research should focus. Following the PRISMA model, a search was carried out in the Web of Science and Scopus databases, identifying 34 valid articles, of which 85.3% are empirical studies that analyze five areas: validity; applicant reactions; design of GRA; personal characteristics and GRA; and adverse impact and faking. Together, these studies show that GRA can be used in personnel selection but that the supposed advantages of GRA over conventional tests are fewer than imagined. The results also suggest several aspects on which research should focus, which could help define the situations in which the use of GRA may be recommended. (shrink)

Legal liabilities pertaining to the identification and selection of domain experts is an issue that could adversely impact expert systems developers. Problems pertaining to flawed knowledge, improperly defined expertise, and behavioural and psychological impediments are just some of the issues. This paper examines the torts of strict products liability and negligence that system developers could incur as a result of expert-related difficulties. Parallels from legal scholars and federal and state court decisions are discussed relevant to expert system projects and (...) developers. The paper concludes with a presentation of steps that systems developers can take to minimize potential legal liability. (shrink)

Although it is now fifteen years since G. Williams' thorough-going criticism of B. Axelson's Unpoetische Wörter, his discussion has failed to elicit the adverse response which might have been expected in view of the widespread influence exerted by the earlier work. The reason for this may be that Axelson's theory is so widely accepted that any refutation thereof may be disregarded. Yet surely Williams was right to point to the dangers of total reliance on statistics and to the necessity (...) of considering the contexts in which words occur in Latin poetry. In this respect, he was not so much rejecting Axelson's work as pointing to its inadequacies: whereas Axelson would be content to label a word that occurs only rarely in poetry as ‘unpoetisch’, it is necessary, as Williams demonstrates, to take the further step of determining the effect that such a word has in a given context. This approach will be particularly helpful, for example, in the case of parvulus at Virg. Aen. 4.328, where the heightened pathos achieved by Virgil's use of a diminutive is better appreciated by the reader who is aware of the scarcity of diminutive adjectives in poetry and in epic above all. To recognise parvulus as an ‘unpoetic word’, with Axelson, is the essential first step, but we should proceed a stage further to inquire what effect was intended by the employment of a form not normally found in elevated poetry. Of greater importance is Williams' rejection of the ‘hierarchy of genres’ theory, taken for granted by Axelson, that is, that Latin poetry may be divided into a number of higher- or lower-ranking genres and that the more elevated a genre the less unpoetic vocabulary it is liable to employ. (shrink)

Background: Pulsed dye laser is the gold standard for treatment of port-wine stain birthmarks but multiple treatments are required and complete resolution is often not achieved. Posttreatment vessel recurrence is thought to be a factor that limits efficacy of PDL treatment of PWS. Imiquimod 5% cream is an immunomodulator with antiangiogenic effects. Objective: We sought to determine if application of imiquimod 5% cream after PDL improves treatment outcome. Methods: Healthy individuals with PWS were treated with PDL and then randomized to (...) apply posttreatment placebo or imiquimod 5% cream for 8 weeks. Chromameter measurements for 57 PWS sites were taken at baseline and compared with measurements taken 8 weeks posttreatment. The Δa and ΔE were measured to quantify treatment outcome. Results: Two patients developed minor skin irritation. Other adverse effects were not noted. Average a was 0.43 for PDL + placebo sites and 1.27 for PDL + imiquimod sites indicating a greater reduction in erythema with imiquimod. Average E was 2.59 for PDL + placebo and 4.08 for PDL + imiquimod, again indicating a greater color improvement with imiquimod. Limitations: Effects were evaluated after a single treatment and duration of effect is unknown. Conclusion: Combined selective photothermolysis and antiangiogenic therapy may enhance PWS treatment efficacy. © 2011 by the American Academy of Dermatology, Inc. (shrink)

BackgroundThe relatively young and inexperienced healthcare professionals in Mongolia faced with an unprecedent service demand in response to the COVID-19 pandemic. Due to the small size of the healthcare workforce the Mongolian Health Ministry had no choice but to mandate continuous and long workhours from the healthcare workforce. Many of the healthcare professionals exhibited signs and symptoms of mental health disorders. This study aimed to discern the prevalence various mental health concerns, i.e., depression, anxiety and stress, insomnia, and to discern (...) the factors that increased susceptibility to mental health disorders among frontline healthcare professionals providing healthcare services for COVID-19 patients in Mongolia.MethodsA Cross-sectional research design was implemented. We collected data from 965 healthcare professional, randomly selected from 18 government hospitals, in four regions of Mongolia. Data were collected using the Depression Anxiety Stress-21, the General Self-Efficacy Scale, and the Insomnia Severity Index instruments. We constructed the scale of Pandemic Response Symptoms which captured stress, depression, and anxiety. Data were analyzed using descriptive statistics, Kruskal–Wallis statistical test and multinominal logistic regression analysis.ResultsPrevalence of depression, anxiety, and stress was documented among Mongolian healthcare professionals. Perception of self-efficacy reduced susceptibility to PaReSy either at mild/moderate or severe/extremely severe level. Within each stratum of insomnia, the risk of experiencing PaReSy increased almost linearly both in the category of mild/moderate PaReSy and in the category of severe/extremely severe PaReSy.ConclusionImproving self-efficacy and sleeping quality can assist healthcare workers to manage depression, anxiety, and stress. Findings provide important evidence to implement measures and strategies to assist healthcare professionals in low- and middle-income countries to constructively address their mental health concerns and needs. (shrink)

Normals display selective deficits in morphology and syntax under adverse processing conditions. Digit loads do not impair processing of passives and object relatives but do impair processing of grammatical morphemes. Perceptual degradation and temporal compression selectively impair several aspects of grammar, including passives and object relatives. Hence we replicate Caplan & Waters's specific findings but reach opposite conclusions, based on wider evidence.

The concept of Industry 4.0 refers to the Fourth Industrial Revolution, which started in the 18th century with the First Industrial Revolution in England and is accepted as the last stage of industrial revolutions reached today. Industry 4.0 is expected to influence all sectors in the economy, especially the industry sector, the emergence of new professions based on cyber physical systems and artificial intelligence (smart machines), the need for labor to decrease considerably and a qualified workforce to remain in the (...) market. Along with the Industry 4.0 process, the change and transformation that will occur in the structure and functioning of the professions will have major impacts both in the individual, social and economic fields. In the present case; career planning and career choice issues, which are already difficult due to educational system troubles, adverse environmental conditions, the level of economic and technological development of the country, etc. will become more complicated for individuals with Industry 4.0 process. In this study, it is aimed to investigate the career selection and the possible effects of change and transformation in professions. In the study in which literature review and editing methods were used; conditions affecting the development and emergence of Industry 4.0 were examined first. Next; career concepts and career choice issues were analyzed. In the last part; in the context of career phases, research and editing has been carried out to determine the effects of Industry 4.0 on career development in children, youth and adults. According to the research data in the study; in the industry 4.0 process, it was determined that some of the existing professions will disappear due to technological development, whereas new occupations that are not currently available will emerge, and the professions that will continue to exist will also change. As a result of all these data, industry 4.0 process is expected to significantly affect professions, career choice and career development. (shrink)

The new class of anti-inflammatory drugs, the COX-2 inhibitors, have been commercially successful to the point of market dominance within a short time of their launch. They attract a price premium on the basis that they are associated with fewer adverse gastric events than traditional anti-inflammatory drugs. This marketing continues even though a pivotal safety study with one of the COX-2 inhibitors, rofecoxib, showed a significant increase in myocardial infarction with rofecoxib use compared with a traditional anti-inflammatory drug. This (...) finding has led to a series of publications containing pooled analyses of existing data that both support and refute the possibility of increased cardiovascular risk with COX-2 inhibitors.These medical journal publications have served to obfuscate rather than provide guidance for medical practitioners. Consideration of a research ethics committee approach to this issue suggests that it would deal with the controversy in a straightforward manner—namely, it would simply inform research participants of the trial results with rofecoxib. The certainty of this research ethics committee approach raises the issue of whether it should be applied in normal medical practice outside of the research environment. A consideration of the legal tests for disclosure of information suggests that therapeutic medical practice should mirror that within the research environment, in this case. (shrink)

Reviews issues in the ethics of access to health insurance based on health problems due to genetic inheritance.

There is a widespread feeling that health is special; the rules that are usually used in other policy areas are not applied in health policy. Health economists, for example, tend to be reluctant to offer economists' usual prescription of competition and consumer choice, even though they have largely failed to justify this reluctance by showing that health economics involves special features such as public goods, externalities, adverse selection, poor consumer information, or unusually severe consequences.

The theory of contracts grew out of the failure of the general equilibrium model to account for the strategic interactions among agents that arise from informational asymmetries. This popular text, revised and updated throughout for the second edition, serves as a concise and rigorous introduction to the theory of contracts for graduate students and professional economists. The book presents the main models of the theory of contracts, particularly the basic models of adverse selection, signaling, and moral hazard. It (...) emphasizes the methods used to analyze the models, but also includes brief introductions to many of the applications in different fields of economics. The goal is to give readers the tools to understand the basic models and create their own.For the second edition, major changes have been made to chapter 3, on examples and extensions for the adverse selection model, which now includes more thorough discussions of multiprincipals, collusion, and multidimensional adverse selection, and to chapter 5, on moral hazard, with the limited liability model, career concerns, and common agency added to its topics. Two chapters have been completely rewritten: chapter 7, on the theory of incomplete contracts, and chapter 8, on the empirical literature in the theory of contracts. An appendix presents concepts of noncooperative game theory to supplement chapters 4 and 6. Exercises follow chapters 2 through 5. (shrink)

The result of two key social developments in recent years are examined here: the partial dismantling of the welfare state and the progress of genetics. Genetic insights are increasingly valuable for risk assessment, and insurers would like to use these insights to help determine premiums. Combined with the fact that social welfare is being curtailed, this could potentially create an uninsured high-risk population. Along with considerations of autonomy and privacy, this is the basis for an ethical critique of insurer's access (...) to information. The result has often been regulation of such information; but the authors argues that due to adverse selection, regulation will not solve these problems, and this may jeopardize the survival of private personal insurance. Instead, we should look towards the resurrection of social insurance, a key component of the welfare state. This will interest academic researchers as well as professionals involved with genetics and insurance. (shrink)

Under conditions with a low level of available genetic information, mutualistic private insurance markets will often create broadly just outcomes, even if by accident rather than by design. Normatively acceptable outcomes of this kind would come under threat if insurers were to have increased access to genetic information with substantial predictive content.1 As the availability of relevant individual genetic information grows, mutualistic forms of market-based insurance face a dilemma between either sacrificing individuals’ interests in genetic privacy, or creating conditions for (...) market failure due to adverse selection. My view is therefore that we have good reason to shift towards more solidaristic forms of ‘risk-sharing institutions’ with regard to functions such as life insurance and critical illness insurance, as a way of resolving normative tensions between values of equality, privacy, non-discrimination and autonomy. Such a position, I have argued, does not depend on endorsing any particular conception of social justice, but can be defended on the basis of a number of different plausible accounts of what justice demands.1 Jonathan Pugh argues against my endorsement of a shift towards solidaristic, non-market risk-sharing institutions, and instead argues broadly in favour of the status quo. He holds that it counts against my proposals that they ‘have wide-ranging and highly revisionary implications’, and argues that my approach is mistaken in relying on ‘a single contestable theory’. Pugh offers a purportedly less contestable account of the relevant normative considerations underlying insurance regimes, composed of three …. (shrink)

We examine whether gender-diverse boards prioritize product market concerns over capital market incentives when proprietary costs are high. We argue that gender-diverse boards protect their firm’s competitive edge and maximize long-term shareholder wealth by ethically and carefully maintaining the confidentiality of proprietary information. Due to the reduced disclosure of proprietary information, firms with gender-diverse boards are likely to face more adverse selection when proprietary costs are high. However, the reduced disclosure of proprietary information enables firms with gender-diverse boards (...) to enhance and maintain their competitive edge and gain higher long-term returns. Using a matched sample of the United States-listed companies, we find that firms with gender-diverse boards, relative to similar firms with all-male boards, (1) are associated with higher adverse selection costs and (2) higher long-run stock returns when the firm faces high product market competition. Collectively, our results suggest that firms with gender-diverse boards, which initially experience higher adverse selection in a competitive environment, are rewarded with a net gain of about 10 percent of their stock price in three years. Our research contributes to the literature by highlighting the importance of board gender diversity in fostering the ethical redaction of proprietary information for proprietary cost-based motives as opposed to agency cost-based motives. Our findings have important implications for regulators, firms, and shareholders by identifying gender-diverse boards as an antecedent for the ethical redaction of proprietary information. (shrink)

Economic analysis is being applied by scholars to an increasing range of legal problems. This collection brings together some of the main contributions to an important area of this work, the economics of contract law. The essays and illuminating notes, questions, and introductions provided by the editor outline the Law and Economics framework for analyzing contractual relationships. The first two parts of the book present a number of useful concepts - adverse selection, moral hazard, and rent seeking - (...) and a general way of thinking about the economics of contracting and contract law. The remainder of the book considers a wide range of topics and issues. The recurring theme is that contracting parties want to assign the responsibility for adjusting to particular contingencies to the party best able to control the costs of adjustment. The adjustment problem is exacerbated by the fact that the parties might engage in various types of strategic behavior, such as opportunism, moral hazard, and rent-seeking. Many contract law doctrines can best be understood as attempts to replicate how reasonable parties might resolve this adjustment problem. (shrink)

Moral choice, as a precursor to behaviour, has an important influence on the success or failure of business entities. According to Rest, 1983, Morality, Moral Behavior and Moral Development (John Wiley & Sons, New York), moral choice is prompted, amongst other things, by a motivational component. With this in mind, data obtained from a sample of four hundred financial sector operatives, employed in a rapidly developing region of China, was used to construct a relatively stable set of motivational typologies which (...) could be used to predict choice within an agency-based context. A non-egoist version of the agency theory was developed, which permitted the modelling of alternative heuristic patterns. Altruists and persons identified as bordering on the verge of being classified as psychological egoists, refused to reorganize their motives when responding to a problem that included both moral hazard and adverse selection criteria. It was also possible to identify certain personal and contextual issues which discriminated between the typologies. (shrink)

Publication date: 28 April 2021 Source: International Letters of Social and Humanistic Sciences Vol. 90 Author: Sarah Kinya Mburugu Listing of a company in the securities exchange has been observed to be followed by underpricing in the first day and long term period of underperformance in terms of pricing in the subsequent days. Consequently, there has been a considerable curiosity from stakeholders, investors and academics to comprehend the assessments of why companies go public and the issues surrounding the short and (...) long-run performance of newly issued equities. Underpricing is necessary to induce uninformed investors to participate in IPO offering when faced with adverse selection from informed investors. This often leads to first day price not reflecting a fair value of the IPO. The objective of the study was to determine the long-run performance IPOs and effects in the Kenyan stock market for the period 2007-2014. A descriptive survey research design was employed in the study. The population of the study encompassed all the 64 listed companies at the NSE as at 2016. The study employed a non-probability purposive sampling technique. Data collected for this study was secondary data obtained from NSE website, NSE price lists and the Central Bank of Kenya website for the period 2007 to 2014. The data obtained was analyzed using Statistical Package for Social Science. Mean Average Buy and Hold Returns, Abnormal Returns and Cumulative Abnormal Returns were used to calculate the performance of the stocks. T-statistic for CAR was computed to the test for its significance. T-test was conducted at 95% confidence level to find if MABHR and CAR were statistically significant after IPOs announcement. (shrink)

Public insurance is commonly assimilated with redistributive tools mobilized by the welfare state in the pursuit of an egalitarian ideal. This view contains some truth, since the result of insurance, at a given moment, is the redistribution of resources from the lucky to unlucky. However, Joseph Heath considers that the principle of efficiency provides a better normative explanation and justification of public insurance than the egalitarian account. According to this view, the fact that the state is involved in the provision (...) of specific insurance is explained and justified by the greater efficiency of the state, in comparison with markets, in addressing market failures such as moral hazard or adverse selection. Our argument is that while insurance, intrinsically and idealistically, may diverge from a redistributive scheme, it is nevertheless difficult to deny that insurance has nothing to do with equality. More precisely, we argue that insurance may be understood as an egalitarian tool if our understanding of equality is broadened to include relational equality. Our paper aims to briefly recap the debates surrounding public insurance as a redistributive tool, advancing the idea that public insurance may be a relational egalitarian tool. It then presents a number of relational arguments in favor of the involvement of the state in the provision of specific forms of insurance, arguments that have been overlooked given the domination of luck egalitarian approaches in these debates. (shrink)

This essay begins by summarizing the reasons why unregulated health-care markets are inefficient. The inefficiencies stem from the asymmetries of information among providers, patients and payers, which give rise to moral hazard and adverse selection. Attempts to ameliorate these inefficiencies by means of risk-adjusted insurance and monetary incentives such as co-pays and deductibles lessen the inefficiencies at the cost of increasing inequalities. Another possibility is to rely on non-monetary incentives, including ordeals. While not a magic bullet, these are (...) feasible methods for addressing the inadequacies of market provision of health care, such as moral hazard. (shrink)

As a tool for regulating the environment in China, does environmental information disclosure reduce pollutant discharge? To answer this question, we empirically analyzed the emission data of “the three wastes” in unit industrial GDP in 31 provincial units. As a measure to reduce institutional emission, environmental information disclosure only slightly influenced waste discharge reduction in the implementation period of the Eleventh Five-Year Plan of China. Instead, command control and market-based tools significantly affected waste discharge reduction. Representative measures included penalties and (...) charges. With the continuously enhanced pressure of control, environmental information disclosure facilitates the effects of command control tools on waste discharge reduction. Content analysis of environmental information disclosed by sample listed companies in Jiangsu Province was conducted. The disclosure of insufficient environmental information on emission reduction can be attributed to “adverse selection” in system performance and to the limited quality of overall environmental information disclosure. This study provides empirical evidence for Chinese policy makers to improve the system for environmental information disclosure of listed companies. (shrink)

The paper studies equilibrium contracts under adverse selection when there is repeated interaction between a principal and an agent over an infinite horizon, without commitment across periods. We show the second-best contract is offered in a perfect Bayesian equilibrium of the infinite horizon model. Unlike the equilibrium contracts in the finite-horizon, the equilibrium contracts in the infinite horizon are not subject to either the ratchet effect or take-the-money-and-run strategy, but rely on a carrot and stick strategy. We study (...) two important applications, one of which is about the optimal regulation of a publicly-held firm. This application has a mixture of both moral hazard and adverse selection. The other application is to the problem of optimal nonlinear pricing when the valuation of the buyers are drawn from a continuum. (shrink)

The United States Environmental Protection Agency has begun to encourage innovative market-based approaches to address nonpoint source water pollution. These water quality trading programs have the potential to achieve environmental standards at a lower overall cost. Two fundamental questions must be answered before these benefits can be realized: How will trades between point and nonpoint sources be monitored and enforced? and, How will nonpoint sources be included within a trading market? ;Point-nonpoint source trading can be accommodated through either a technology-based (...) or performance-based approach. The technology-based approach accommodates trading through the use of a proxy for unobservable, individual nonpoint source emission reductions. While trading ratios can effectively deal with the uncertainty associated with using a proxy for actual abatement, they are inefficient and ineffective for dealing with problems of hidden action. The alternative use of performance-based trading approaches requires the use of team contracts that provide individual incentives linked to the performance of the entire group. Such contracts must be designed to overcome both adverse selection and moral hazard problems. Performance-based approaches promise efficiency gains in terms of reducing the problems of asymmetric information, and by introducing flexibility into the choice of nonpoint source abatement technologies and practices. ;Nonpoint sources are exempted from direct regulation under the polluter-pays-principle. As a result, their participation in trading markets is voluntary, thus preventing a baseline cap on pre-trade emissions. To determine whether this arrangement should be changed, we must ask if there something that morally prohibits the direct regulation of nonpoint sources of pollution. While a morally relevant distinction can be made between point and nonpoint sources of emission based on differences in the ability to observe individual emission levels, this relevance is limited to the case of performance-based policy instruments. The moral legitimacy of applying the polluter-pays-principle to nonpoint sources of pollution must be made on a case by case basis, as it is dependent upon existing social, economic, and other practical factors. However, it can be stated that there is no general moral barrier to prohibit the application of the polluter-pays-principle to nonpoint sources of pollution. (shrink)

Gender role congruity theory emphasizes the ubiquity of male-typed leadership schemas as barriers to female leaders’ career development (i.e., descriptive stereotypes); however, the expectation of female leaders’ fulfilling their gender role (i.e., prescriptive stereotypes) has received limited attention. Extending this line of research, we propose the concept of female-typed leadership schemas and suggest that the (mis)match between female CEOs’ gender-stereotyped behavioral differences (agentic vs. communal) and female-typed leadership stereotypes helps explain the prescriptive gender stereotypes that women face in the CEO (...) post-succession stage. Using data from 251 female CEO succession events at publicly listed firms on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2017 in China, we found that the risk-taking behaviors of new female CEOs may lead to a perceived mismatch between prescriptive gender-stereotyped expectations and the actual behaviors of female CEOs as top leaders, increasing their likelihood of being dismissed during the post-succession process. Moreover, gender inequality beliefs in local contexts and adverse selection at the time of succession amplify the gender-stereotyped attribution. This study contributes to the female leadership and ethics literature by developing a comprehensive theoretical framework to test how female-typed leadership stereotypes hinder the career development of women in top executive positions. (shrink)

How do states build a security apparatus after violent resistance against state rule? This article argues that in early periods of state building two main factors shape the process: the macro-strategic goals of the state and administrative challenges of personnel management. These dynamics are studied in the context of the establishment of police forces in the settler colony of German Southwest Africa, present-day Namibia. The empirical analysis relies on information about the location of police stations and a near full census (...) of police forces, compiled from the German Federal Archives. A mismatch is found between the allocation of police presence and the allocation of police personnel. The first was driven by the strategic value of locations in terms of extractive potential, political importance, and the presence of critical infrastructure, whereas the allocation of individual officers was likely affected by adverse selection, which led to the assignment of low-quality recruits to strategically important locations. (shrink)

There is a widespread feeling that health is special; the rules that are usually used in other policy areas are not applied in health policy. Health economists, for example, tend to be reluctant to offer economists’ usual prescription of competition and consumer choice, even though they have largely failed to justify this reluctance by showing that health economics involves special features such as public goods, externalities, adverse selection, poor consumer information, or unusually severe consequences. Similarly, while some philosophers (...) argue for bioethical conclusions based on very general ethical intuitions,1 many others rely on moral intuitions that are specific to health and medicine to draw conclusions that are meant to apply mainly in health and medicine. For example, many authors appear to start from the strong moral intuition that it typically seems wrong to deny poor people access to health care, and then seek moral principles that can both account for such intuitions and justify the claim that people have some sort of right to health care.2 In metaethics, opinions on moral intuitions range from an extreme intuitionism, which accepts all case-specific moral intuitions at face value as reliable moral guides, to an extreme foundationalism, which rejects such intuitions as evidence regarding correct general moral principles. Between these extremes, opinions vary on how severe the errors in our moral intuitions are. The practice of bioethics seems to favor the extreme intuitionist end of this spectrum, and thus implicitly expects mild errors.3 In contrast, this essay will suggest that common practice in bioethics has seriously underestimated the errors in our moral intuitions. In this essay, I consider the evolutionary origin of our moral intuitions, but avoid the extreme positions of moral skepticism and “whatever evolved must be good,” both of which are commonly associated with evolution-. (shrink)

The economic distinction between technological and market information offers a useful guide to the relationship between information and policy. The two types create different problems for markets and require different emphases in public policy, focusing on either the production or the distribution of information. The interaction of the two types creates familiar policy problems such as underinvestment in information, adverse selection and moral hazard. Indicators and other means of dealing with such problems constitute policies and demonstrate not only (...) the importance of information for policy but the necessity of policy for information. (shrink)

Despite criticism in the wake of the GFC, history shows that theory and curricula adapt to rectify any disconnects between theory, curricula, and practice. Finance theory unquestionably has antecedents in economics, accounting, legal theory, and psychology. Some theoretical developments—including the moral hazard consequences of limited liability—have yet to filter through to many texts and curricula, which also omit explanations of uncertainty; incomplete and optimal contracting; contagion; and behavioural finance. Student learning outcomes could be enhanced if universities, perhaps in a final (...) year, cross-disciplinary “capstone” course, empowered students to understand the financial documentation evidencing sophisticated transactions; map relevant cash flows and wealth transfers; and recognise Ponzi schemes, the ethics of stakeholder wealth transfers, the conditions for contagion, and incentives for adverse selection and moral hazard in practice. (shrink)

Whether dealing with contracts, tort actions, or government regulations, lawyers are more likely to be successful if they are conversant in economics. Economics for Lawyers provides the essential tools to understand the economic basis of law. Through rigorous analysis illustrated with simple graphs and a wide range of legal examples, Richard Ippolito focuses on a few key concepts and shows how they play out in numerous applications. There are everyday problems: What is the social cost of legislation enforcing below-market prices, (...) minimum wages, milk regulation, and noncompetitive pricing? Why are matinee movies cheaper than nighttime showings? And then there are broader questions: What is the patent system's role in the market for intellectual property rights? How does one think about externalities like airport noise? Is the free market, a regulated solution, or tort law the best way to deliver the "efficient amount of harm" in the workplace? What is the best approach to the question of economic compensation due to a person falsely imprisoned? Along the way, readers learn what economists mean when they talk about sorting, signaling, reputational assets, lemons markets, moral hazard, and adverse selection. They will learn a new vocabulary and a whole new way of thinking about the world they live in, and will be more productive in their professions. (shrink)

In this paper I want to discuss a well-known but poorly understood problem: how can socialists reconcile the observed paucity of cooperatives in capitalist societies with their alleged superiority on normative grounds? If cooperatives are so desirable, why don't workers desire them? If one's ideal of socialism is central planning, it is clear enough that it cannot emerge gradually within the womb of the capitalist economy. If instead it is something like market socialism, it is not clear that a discontinuous (...) transformation of society is required. If workers want socialism, they can start up here and now. If they don't, doesn't it prove that they do not want it? I shall proceed as follows. Section I argues that the usual explanation - that cooperatives are not economically viable or that workers prefer working in capitalist firms – is not necessarily correct. The explanation may lie elsewhere, in endogenous preference formation, adverse selection, discrimination, or externalities. Section II is concerned with the variety of cooperative arrangements. Only rarely do we find cooperatives in their pure form, with all workers and only workers having equal ownership rights. Non-working owners, non-owning workers and unequal distribution of shares are frequent. When the deviations become sufficiently large, the firms cease to become cooperatives in any meaningful sense. Section III extends the argument of Section I by surveying the causes of cooperative failure. Some fail by success: profitable cooperatives often attract or turn into private ownership. Others fail outright, partly because they tend to be established under unfavorable circumstances and partly because of intrinsic difficulties of management. (shrink)

Categories intentionally create discontinuities. By breaking the world up into cognizable chunks, they simplify the information environment. But the signals they provide may be inaccurate or scrambled by strategic behavior. This Article considers how law might approach the problem of optimal categorization, given the role of categories in managing and transmitting information. It proceeds from the observation that high categorization costs can be addressed through two opposite strategies—making classifications more fine-grained (splitting), and making classifications more encompassing (lumping). Although continuizing and (...) other forms of splitting offer intuitive answers to inaccurate classification and gaming along category lines, lumping is sometimes a better solution. If category membership carries multiple and offsetting implications, the incentive to manipulate the classification system is dampened. To take a simple example, insurance that covers only one risk is more vulnerable to adverse selection than is an insurance arrangement that covers two inversely correlated risks. Making categories larger, more durable, and more heterogeneous can produce such offsets. These and other forms of bundling can arrest damaging instabilities in categorization. (shrink)

This paper studies the influence of agency conflicts on the irreversibility effect. Using a dynamic variant of the static Baron and Myerson :911–930, 1982) adverse selection model, we characterize under which circumstances the irreversibility effect arises in the presence and absence of an agency conflict. In particular, we find that in the presence of an agency conflict the irreversibility effect arises in more circumstances than in the standard first-best analysis that abstracts from agency problems.

Despite the extensive body of literature that aims to explain the phenomenon of consumer scams, the structure of information in scam relationships remains relatively understudied. The purpose of this article is to develop an agency-theoretic approach to the study of information in perpetrator–victim interactions. Drawing a distinction between failures of observation and failures of judgment in the pre-contract phase, we introduce a typology and a set of propositions that explain the severity of adverse selection problems in three classes (...) of scam relationships. Our analysis provides a novel, systematic explanation of the structure of information that facilitates scam victimization, while also enabling critical scrutiny of a core assumption in agency theory regarding contract design. We highlight the role of scam perpetrators as agents who have access to private information and exercise considerable control over the terms and design of scam relationships. Focusing on the consumer scam context, we question a theoretical assumption, largely taken for granted in the agency literature, that contact design is necessarily in the purview of the uninformed principal. (shrink)

ABSTRACT:Some business ethicists view agency theory as a cautionary tale—a proof that it is impossible to carry out successful economic interactions in the absence of ethical behaviour. The cautionary-tale view presents a nuanced normative characterisation of agency, but itsunilateralfocus betrays a limited understanding of the structure of social interaction. This article moves beyond unilateralism by presenting a descriptive and normative argument for abilateralcautionary-tale view. Specifically, we discuss hat swaps and role dualism in asymmetric-information principal-agent relationships and argue that the norm (...) of reciprocity can function as a moral solution to agency risks in adverse-selection and moral-hazard problems. Our bilateral cautionary-tale formulation extends the normative boundaries of agency theory, while leaving the fundamental economic assumptions of agency theory intact. (shrink)