Price-setting by Committee in Medicare

David Chan (Stanford University)
Michael Dickstein (New York University)

Abstract : A committee of physicians sets prices for physician services in Medicare. We study the operation of this committee, examining the theoretical tradeoff between bias and communication in delegating to a committee with a potential conflict of interest. We find that the committee grants higher prices to more affiliated physician specialties: increasing affiliation by one standard deviation increases prices by 10%. Eliminating this effect would reallocate roughly $1.9 billion in annual Medicare spending across services. Proposers less affiliated with the committee produce more hard information, measured as better survey data. Finally, we find that specialties form coalitions to increase proposal affiliations with the committee, and that more affiliated proposals result in prices that are more closely followed by private insurers.

A Bargain for Tuna: a Coasean Solutions to Bigeye Tuna Bycatch

Ovando Dan (UCSB)
Libecap Gary (UCSB)
Lennon Thomas (UCSB)
Kat Millage (UCSB)

Abstract : Many environmental/natural resource problems persist despite consensus that aggregate benefits exceed costs so that action should be taken. Nevertheless, responses are often delayed with final policies that do not correspond to ideal types. Distributional conflicts impede collective action. Bigeye tuna in the Western Central Pacific are an example. They are an economically and ecologically critical species that is overfished. Standard regulatory solutions have been unsuccessful. Overfishing of bigeye stems from accidental catch of juvenile bigeye in the skipjack tuna fishery. Our estimate of the benefits of reduced bigeye juvenile harvest are less than the costs imposed on the skipjack fleets from adjustments in fishing technologies. If the constraints, however, are directed only to hotspots where incidental harvests are largest, then benefits exceed costs. We identify fleets involved and construct a payment scheme to fleet owners so that conservation of bigeye does not make them worse off. Enforcement is feasible because fishing largely takes place within the economic zones of small island states. Who should pay? Long-line fleet owners who directly harvest bigeye tuna are an option, but there are high transaction costs. Consumers in Japan who value bigeye in the sashimi market are another option. The tuna distribution market in Japan is highly-concentrated and Japanese consumers have been willing to pay a premium for sustainably-caught fish. This concentration reduces the transaction costs of collecting a sustainability tax and distributing compensating payments to parties that must adjust behavior. This is a unique example of large-scale use of “beneficiary pays” rules. Coasean bargaining offers a breakthrough in achieving agreement on reducing the incidental harvest of bigeye tuna that thus far has eluded action. It provides a template for other problems where “polluter pays” rules via regulation or taxes have failed.

Discriminatory Product Differentiation: the Case of Israel’s Omission from Airline Route Maps

Joel Waldfogel (University of Minnesota)
Paul M. Vaaler (University of Minnesota)

Abstract : While product differentiation is generally benign, it can be employed to discriminate against customer groups, either to enhance profitability by appealing to discriminatory customers or in unprofitable ways that indulge owners’ tastes for discrimination. We explore discriminatory product differentiation by international airlines through their depictions of Israel on online route maps and whether their online inflight menus include kosher meal options. We first show that several airlines omit Israel from their online route maps. Three of these airlines are members of major international airline alliances. With data on over 100 airlines, we then document that online route map “denial” of Israel’s existence is more likely for airlines with likely customers from countries exhibiting greater anti-Semitism. Likely owner tastes also matter: denial is more likely for state-owned airlines in countries that do not recognize Israel. Availability of kosher meal options follows similar patterns, suggesting anti-Semitic rather than anti-Zionist motivations. Neither online route map treatment nor ownership by states not recognizing Israel affects the likelihood of alliance membership with alliance leaders having few airline alternatives to choose from in the Middle East.

Monetizing Technology Through Licensing Agreements: a Cross-national Empirical Investigation

Shan Yu (Rensselaer Polytechnic Institute)
Mrinal Ghosh (University of Arizona)
George John (University of Minnesota)
Chae-Un Lim (Sogang University)

Abstract : Firms in technology and industrial domains are increasingly seeking licensing agreements to profit from the sale of intellectual property (IP) that they create. The marketing of such intellectual property, however, is fraught with two fundamental problems – how to demonstrate the value of the technology/knowledge to the buying party (the value realization problem) and how to protect the knowledge that is being shared from being appropriated away by opportunistic partners. In this research, we draw on governance theories and use data from international licensing agreements between foreign licensor firms and Korean licensee firms to show how firms modulate the three most prominent provisions of technology licensing agreements (TLAs) – the payment format, the extent to which the licensor cedes control rights for the technology to the licensee and the provision of Human Capital – to mitigate the contractual problems in value realization and value appropriation. In addition, we also study the interdependence between these contractual provisions. We finally draw implications for theory and practice.