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We explore the consequences of limiting executive pay on voluntary executive turnover by exploiting a Chinese government policy restricting executive pay at a subset of firms. Affected firms experience an increase in voluntary executive turnover, with executives increasingly moving to firms not bound by the pay policy. Executives that leave are of higher quality as suggested by their stronger stock and accounting performance in the year prior to the turnover. Affected firms suffer firm value losses, especially when talented executives leave. Our findings demonstrate the importance of compensation contracts in retaining executives and suggest a need for regulatory caution, since mandated constraints aimed at trying to "fix" executive pay can hurt firm value and ultimately, hurt shareholders. This paper was accepted by Suraj Srinivasan, accounting. Funding: S. Silveri acknowledges research support in the form of a summer research grant from the Fogelman College of Business and Economics at the University of Memphis. This research support does not imply endorsement of the research results by either Fogelman College or the University of Memphis. K. Wang is grateful for the financial support provided by the Tsinghua University Initiative Scientific Research Program and the research project of the Institute for State-Owned Enterprises, Tsinghua University. L. Zhao is grateful for the financial support provided by the Asia Research Center in Nankai University [Project AS2206]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4812. [ABSTRACT FROM AUTHOR]

Electronic health record (EHR) systems allow physicians to automate the process of entering patient data relative to manual entry in traditional paper-based records. However, such automated data entry can lead to increased reimbursement requests by hospitals from Medicare by overstating the complexity of patients. The EHR module that has been alleged to increase reimbursements is the Computerized Physician Order Entry (CPOE) system, which populates patient charts with default templates and allows physicians to copy and paste data from previous charts of the patient and other patients' records. To combat increased reimbursements by hospitals from Medicare, the Centers for Medicare & Medicaid Services implemented the Recovery Audit Program first as a pilot in six states between 2005 and 2009 and then, nationwide in the entire United States in 2010. We examine whether the adoption of CPOE systems by hospitals is associated with an increase in reported patient complexity and if the Recovery Audit Program helped to attenuate this relationship. We find that the adoption of CPOE systems significantly increases patient complexity reported by hospitals, corresponding to an estimate of $1 billion increase in Medicare reimbursements per year. This increase was attenuated when hospitals were regulated by the Recovery Audit Program. Notably, those recovery auditors who developed the ability to identify the use of default templates, copied and pasted data, and cloned records were the most effective in reducing increased reimbursements. These findings have implications on how to combat Medicare reimbursements paid by taxpayer dollars with the Recovery Audit Program and how this information technology (IT) audit can prevent the misuse of information systems to create artificial business value of IT by hospitals. Contributions to information systems and healthcare research, practice, and public policy are discussed. This paper was accepted by Chris Forman, information systems. [ABSTRACT FROM AUTHOR]

Policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers’ financial decisions over the last generation. We conduct a meta-analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies. We find that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. Like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention. Correlational studies that measure financial literacy find stronger associations with financial behaviors. We conduct three empirical studies, and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies. We envisage a reduced role for financial education that is not elaborated or acted upon soon afterward. We suggest a real but narrower role for “just-in-time” financial education tied to specific behaviors it intends to help. We conclude with a discussion of the characteristics of behaviors that might affect the policy maker’s mix of financial education, choice architecture, and regulation as tools to help consumer financial behavior. [ABSTRACT FROM AUTHOR]

We study portfolio choice with multiple stocks and capital gains taxation, assuming that capital losses can only offset current or future realized capital gains. We show, through backtesting using empirical distributions, that optimal equity holdings over an extended period are significantly lower on average than benchmark holdings suggested in the literature. Using value and growth or small and large portfolios, the backtests show that allocations remain persistently underdiversified. Carryover losses have large economic significance since they can dramatically shrink the no-trade region. Finally, the backtested economic cost of incorrectly modeling capital losses is at least 8% of lifetime wealth. The Internet appendix is available at https://doi.org/10.1287/mnsc.2017.2733. This paper was accepted by Neng Wang, finance. [ABSTRACT FROM AUTHOR]

We investigate the equilibrium relationship between product quality and word-of-mouth (WOM) communication. Specifically, we ask whether firms should optimally produce 'better' products when consumers are more likely to exchange information. The critical moderating factor in our model is the nature of the communication and what its primary impact is. We first look at WOM that expands awareness of a product. We show that quality may either increase or decrease as WOM expands. The answer depends, in part, on the extent to which the expansion of WOM is one of scale alone or whether it also fundamentally changes the structure of communications. Next, we examine a model in which the primary impact of WOM is to help people to evaluate the utility provided by products with which they are already familiar. Our model suggests that more WOM in this context should always lead to higher-quality products. We demonstrate that the underlying driver of this result is that the elasticity of demand with respect to quality is increasing in the proportion of consumers who are informed about the product's quality. Taken together, the two models therefore suggest that the firm's optimal product-policy response to the growth in social interactions depends on both the content and the structure of the underlying conversations. Finally, we compare both WOM models to analogous models of advertising and demonstrate that the firm's optimal response to a decrease in advertising costs is quite different from that to an increase in WOM. The reason for these differences can be traced back to a fundamental distinction between advertising and WOM: although the former is optimized, the latter is far more random. This paper was accepted by J. Miguel Villas-Boas, marketing. [ABSTRACT FROM AUTHOR]

The Hospital Readmissions Reduction Program (HRRP), a part of the U.S. Patient Protection and Affordable Care Act, requires the Centers for Medicare and Medicaid Services to penalize hospitals with excess readmissions. We take an economic and operational (patient flow) perspective to analyze the effectiveness of this policy in encouraging hospitals to reduce readmissions. We develop a game-theoretic model that captures the competition among hospitals inherent in HRRP's benchmarking mechanism. We show that this competition can be counterproductive: it increases the number of nonincentivized hospitals, which prefer paying penalties over reducing readmissions in any equilibrium. We calibrate our model with a data set of more than 3,000 hospitals in the United States and show that under the current policy, and for a large set of parameters, 4%-13% of the hospitals remain nonincentivized to reduce readmissions. We also validate our model against the actual performance of hospitals in the three years since the introduction of the policy. We draw several policy recommendations to improve this policy's outcome. For example, localizing the benchmarking process-comparing hospitals against similar peers-improves the performance of the policy. This paper was accepted by Serguei Netessine, operations management. [ABSTRACT FROM AUTHOR]

In recent years, performance measurement has become the focus of attention in a variety of public sector fields. Unfortunately, too little has been done to develop valid operational definitions of performance, or to identify the weaknesses and biases inherent in certain types of performance measures. Thus, the potential exists for the inappropriate use of certain indicators in performance evaluations and decisions. One field in which there has been increasing effort to deal with performance problems is that of transit. Regardless, the nebulous nature of "performance" has been all too apparent in this industry. The terms "productivity," "efficiency," and "effectiveness" have been used synonymously in some instances, while in other cases "efficiency" and "effectiveness" have been considered to be different aspects of overall "productivity." This confusion is of major significance, because the use of performance measures in operations assessment, decision making, and resource allocation is increasing. Furthermore, since it increasingly is being urged that subsidy payments be linked to the performance of a transit system, and since subsidies now constitute over half of transit revenues, the performance measurement problem is particularly important. This paper examines weaknesses and biases inherent in commonly used measures of urban mass transit performance. It is shown that measures of efficiency, such as cost per passenger, are being incorrectly used as measures of effectiveness and that various traditional measures of efficiency, such as those which incorporate mileage, can be misleading when applied in decision making. Suggestions are made for developing valid performance indicators and for developing safeguards that will avoid present shortcomings. [ABSTRACT FROM AUTHOR]

State-Owned Enterprises (SOEs) have become important instruments of social and economic policy in industrialized mixed economies and in developing countries. The use of SOEs as instruments of public policy and the resulting clashes between these enterprises and private firms on the one hand and government and other controllers on the other, are causing concern. Public committees in different countries as well as international organizations have been searching for positive theory for guidance in handling the multitude of problems related to these enterprises. Theoretical models have made important contributions to the formalization of certain problems and the classification of the information needed to solve them. Unfortunately, these theoretical models have had little relevance for the solution of important real problems. Much of the research on SOEs is concerned with how these enterprises should behave, and what should be the product of their operations. Almost no research has been done on why SOEs function as they do. The paucity of knowledge about the operation of SOEs stems both from insufficient research effort, and from the concern of researchers with formal structures and products of these organizations and not with management behavior or with decision processes. The purpose of this paper is to call for research beyond the confines of traditional economics, using the tools of management science to obtain insights into the difficult but salient problems of SOEs. [ABSTRACT FROM AUTHOR]

Since the early 1970s, it has been realized that rapid economic development in developing countries leads to an acute inequality in income distribution. To prevent massive dissatisfaction among their citizens, developing countries were urged to achieve economic growth (particularly industrial growth) with distribution of income as their development goal. A good way of promoting growth and dispersal of industrial activities is the establishment of industrial estates in the locations where such activities are desired. This paper formulates the problem of optimal development of industrial estates, with the incorporation of specified minimum levels of development in poverty (priority) sites as distributive targets, as encountered by a Malaysian state government. The linear programming problem so formulated is then shown to be equivalent to a transportation problem, enabling it to be solved and parametically analyzed efficiently. Computational results, obtained using real-life data, show that the subsidy incurred in fulfilling the distributive targets is small compared to the total revenue generated. This justifies the imposition of the distributive targets on the development process. Further, the optimal policy was found to involve decisions to be taken in the initial years of the planning horizon that are fairly insensitive to variation in demand and cost parameters, thereby demonstrating the relative 'goodness' of the optimal policy for industrial estate development in the state. [ABSTRACT FROM AUTHOR]

Genetic counseling has long held promise as a means for controlling Tay-Sachs disease, thalassemia, sickle cell anemia, and a host of other untreatable genetic illnesses. This paper reports a study to investigate the long-term viability of genetic counseling as an alternative to searching for a cure for sickle cell anemia. The paper includes consideration of the relative lack of fitness of individuals with sickle cell anemia, the effect of mutation from normal to sickle hemoglobin, and the effect of interbreeding between the black and white races as well as the result of counseling specific proportions of the population with high risk rather than counseling everyone. The results project the theoretical rate of sickle cell anemia in the U.S. black population over the next 800 years, and are viewed qualitatively rather than as firm projections due to the preliminary nature of the counseling data and the simplifying assumptions of the model. They suggest that counseling programs can play a very large role in reducing the incidence of sickle cell anemia, even in the near future. [ABSTRACT FROM AUTHOR]

This paper presents a model for determining how a central government can most efficiently allocate resources among other levels of government. The model explicitly includes the fact that lower levels of government can make independent decisions once they have been given resources by the central government. A key feature of the model is the mathematical formulation of the central government's objective of distributing resources efficiently, while at the same time being as fair as possible to all those receiving allocations. An algorithm for solving the model is presented along with a numerical example. [ABSTRACT FROM AUTHOR]

We exploit an investor-paid rating agency's designation as a Nationally Recognized Statistical Rating Organization (NRSRO) to test whether this certification affects the agency's information production. We use a certified issuer-paid agency as a benchmark and find robust evidence that the investor-paid agency's ratings policy-both timelier and more symmetric with respect to positive and negative information-persists after it became certified for regulatory compliance. Our results suggest that ratings policy is more a function of rating agency compensation structure than the NRSRO certification by the U.S. Securities and Exchange Commission. This paper was accepted by Gustavo Manso, finance. [ABSTRACT FROM AUTHOR]

This paper examines the role of firms' sociopolitical reputations, as proxied by their perceived engagement in socially responsible practices, in public policy makers' decisions to grant access in the policy-making process. I argue that policy makers' dependencies, motivations, and decision-making processes lead them to evaluate firms by using sociopolitical reputation as a differentiating heuristic. I hypothesize that firms that construct stronger sociopolitical reputations will be granted greater access and that firms' existing political activity and policy makers' partisanship will moderate this relationship. I test these hypotheses using an 11-year panel on congressional testimony, reputation, and political and financial characteristics for the S&P 500 and find support for all three. These findings support the existence of a sociopolitical dimension to firms' reputations that affects how public policy makers evaluate firms, demonstrating that corporate social responsibility pays political benefits. [ABSTRACT FROM AUTHOR]

People vary in what they view as a fair distribution of earnings in organizations and, more generally, society. Where do these different views originate? We study the question of whether the experience of failure or success in a winner-take-most competition shapes people's perspectives about distributive justice. In a laboratory experiment, subjects generated a high or low income either through a lottery or through a performance-based tournament. A subset of subjects could then redistribute the income of another subset of subjects. We find that the tournament losers redistribute significantly more than all of the other distributors when the inequality is generated by the tournament, whereas the lottery losers redistribute significantly more than all of the other distributors when the inequality is generated by the lottery. The effect still holds when controlling for potential self-selection into different outcomes of the tournament. We replicate the results in a second experiment and show that the underlying psychological mechanisms include an in-group bias and a self-serving bias in responsibility attribution. These findings have implications for the design of compensation schemes in organizations and for public policies in general. This paper was accepted by Yan Chen, decision analysis. [ABSTRACT FROM AUTHOR]

Influenza vaccination decisions in one country can influence the size of an outbreak in other countries due to interdependent risks from infectious disease transmission. This paper examines the inefficiency in the allocation of influenza vaccines that is due to interdependent risk of infection across borders and proposes a contractual mechanism to reduce such inefficiencies. The proposed contract is based on an epidemic model that accounts for intranational transmission and that from a source country where the dominant strain emerges. The contract reduces the overall financial burden of infection globally and improves the total number infected by seasonal influenza outbreaks. This is consistent with recent recommendations to improve pandemic preparedness. Numerical experiments demonstrate that the benefits of the contract can prevent millions of influenza cases and save tens of millions of dollars, and that the benefits are even greater when cross-border transmission is higher, even if cross-border transmission parameters have moderate estimation errors. [ABSTRACT FROM AUTHOR]

This paper extends our previous studies on the assimilation of Internet-based e-business innovations by firms in an international setting. Drawing upon theories on the process and contexts of technology diffusion, we develop an integrative model to examine three assimilation stages: initiation, adoption, routinization. The model features technological, organizational, and environmental contexts as prominent antecedents of this three-stage assimilation process. Based on this model, we hypothesize how technology readiness, technology integration, firm size, global scope, managerial obstacles, competition intensity, and regulatory environment influence e-business assimilation at the firm level. A unique data set of 1,857 firms from 10 countries is used to test the conceptual model and hypotheses. To probe deeper into the influence of the environmental context, we compare two subsamples from developed and developing countries. Our empirical analysis leads to several key findings: (1) Competition positively affects initiation and adoption, but negatively impacts routinization, suggesting that too much competition is not necessarily good for technology assimilation because it drives firms to chase the latest technologies without learning how to use existing ones effectively. (2) Large firms tend to enjoy resource advantages at the initiation stage, but have to overcome structural inertia in later stages. (3) We also find that economic environments shape innovation assimilation: Regulatory environment plays a more important role in developing countries than in developed countries. Moreover, while technology readiness is the strongest factor facilitating assimilation in developing countries, technology integration turns out to be the strongest in developed countries, implying that as e-business evolves, the key determinant of its assimilation shifts from accumulation to integration of technologies... [ABSTRACT FROM AUTHOR]

This paper illustrates a methodology to evaluate how dissimilar military systems support the accomplishment of the United States' counterproliferation objectives. The key questions in evaluating counterproliferation systems are identified. By using decision analysis, an influence diagram model is developed that represents military activities in the counterproliferation process. A value model is developed that enables systems to be evaluated against common criteria. An analysis of intelligence, defensive, and offensive counterproliferation systems suggests that intelligence system improvements may provide the greatest potential to meet the United States' counterproliferation objectives. Sensitivity analysis is conducted to determine which factors in the model are most important. To demonstrate the model, nine systems from the Air Force Vulcan's Forge 1995 wargame are evaluated. This paper illustrates the value of decision analysis, and influence diagrams in particular, by involving decision makers and subject matter experts in structuring complex problems for analysis. [ABSTRACT FROM AUTHOR]

Using a model of the resource allocation behavior of a group of firms, Joglekar and Hamburg (1983) demonstrate that unaided industry allocation to basic research is suboptimal and that in stimulating this allocation, provision of government seed money is generally counterproductive, while the provision of matching subsidies is not cost-efficient. Using basically the same model, but focusing on the case of a homogeneous industry, Joglekar and Hamburg (1986) further identify several industry characteristics that increase the degree of suboptimality of investment in basic research, and consequently, the need for government intervention. Joglekar and Hamburg (1983), (1986) assume that a firm's benefits from its investment in appropriable activities are independent of its benefits from the industry's total investment in the pertinent basic (i.e., inappropriable) research. Investment theory suggests that a firm's benefits often depend upon its investment portfolio and that an investment in basic research that is not supported by suitable investments in other activities (e.g., plant and equipment, personnel training, etc.) may yield far smaller benefits than could be potentially obtained. Therefore, in this paper, I present a model that assumes such an interdependence of benefits. I find that most of Joglekar and Hamburg's (1983), (1986) conclusions are confirmed by the new model. [ABSTRACT FROM AUTHOR]

The aim of this paper is two-fold. Firstly, it seeks to compare the efficacy of the Malaysian integrated population (i.e., integration of family planning with health) program with its categorial family planning counterpart. Secondly, it attempts to identify the organizational factors and the 'integration' factors (operationalized as staff integrative linkages) that result in better program performance for the two programs. On the basis of effectiveness of family planning diffusion, the results of the analysis indicate that the Malaysian integrated population program is more effective than its categorial counterpart. Further, integrative linkage variables were found to be an important group of variables that results in the improved effectiveness of the integrated program. This suggests that future expansion of the Malaysian population program (and population programs of other developing countries in a similar stage of development as Malaysia) should be through the approach of integrating family planning services with the health network, rather than through the expansion of the categorial family planning organization. [ABSTRACT FROM AUTHOR]

Current federal policies toward interfirm cooperation in research and development are designed to maximize society's use of available technology. Models of industry resource allocation behavior demonstrate that these policies are detrimental to the formation of risk sharing consortia for the development of new technology. The reason is that current policies often deprive applied research and development activities of their appropriability. Analytical results suggest that, if appropriability is maintained, an underinvestment in applied research and development can be corrected, in most cases, simply by permitting firms to share the benefits and costs of projects in proportion to firms' investments. A permissive governmental posture may be particularly effective for industries consisting of a large number of firms with some firms relatively larger than others. Industries consisting of small numbers of relatively equal size firms may require government as a participant in consortia for applied research and development (appropriable but risky R & D activities). [ABSTRACT FROM AUTHOR]

Federal guidelines provide grounds for determining when a racial, ethnic or sex group has experienced discrimination in selection or promotion. This paper assumes that a predetermined number of people are selected or promoted and presents a simple model that computes the exact probabilities of type I and type II errors, that is, concluding adverse impact when none exists and concluding no adverse impact when it does, in fact, exist. [ABSTRACT FROM AUTHOR]

The U.S. Equal Employment Opportunity Coordinating Council is responsible for the elimination of inconsistencies among the operation of the agencies and departments that enforce Federal equal employment opportunity laws. It has recently promulgated quantitative guidelines to determine if employee selection and promotion rules have a disproportionate impact on a racial, ethnic, or sex group. These guidelines state that if the observed promotion or selection rate for any group is less than four-fifths of the rate for the group with the highest rate, then disproportionate impact will be concluded. In this paper a quantitative analysis of the guidelines is performed which demonstrates that their application in many situations can lead to large statistical errors of both kinds: type I errors (concluding that there is disproportionate impact on a group when in fact all groups have the same probability of passing) and type II errors (concluding that there is no disproportionate impact on a group when in fact there is). Thus, a large number of actual cases of discrimination will go undetected and truly nondiscriminatory practice will be erroneously deemed discriminatory a substantial fraction of the time. Type I and type II errors are presented for a range of actual passing rates for samples from two groups and three groups. Also presented, for up to ten groups, are the numbers of applicants per group required such that the expected minimum observed passing rate is at least four-fifths of the expected maximum observed rate, given that all groups have the same actual passing rate. [ABSTRACT FROM AUTHOR]

This paper presents an in-depth computational comparison of the basic solution algorithms for solving transportation problems. The comparison is performed using "state of the art" computer codes for the dual simplex transportation method, the out-of-kilter method, and the primal simplex transportation method (often referred to as the Row-Column Sum Method or M O D I method). In addition, these codes are compared against a state of the art large scale LP code, O P H E L I E/LP. The study discloses that the most efficient solution procedure arises by coupling a primal transportation algorithm (embodying recently developed methods for accelerating the determination of basis trees and dual evaluators) with a version of the Row Minimum start rule and a "modified row first negative evaluator" rule. The resulting method has been found to be at least 100 times faster than OPHELIE, and 9 times faster than a streamlined version of the SHARE out-of-kilter code. The method's median solution time for solving 1000 X 1000 transportation problems on a CDC 6600 computer is 17 seconds with a range of 14 to 22 seconds. Some of the unique characteristics of this study are (1) all of the fundamental solution techniques are tested on the same machine and the same problems, (2) a broad spectrum of problem sizes are examined, varying from 10 X 10 to 1000 X 1000; (3) a broad profile of nondense problems are examined ranging from 100 percent to 1 percent dense; and (4) additional tests using the best of the codes have been made on three other machines (IBM 360/65, UNIVAC 1108, and CDC 6400), providing surprising insights into conclusions based on comparing times on different machines and compilers. [ABSTRACT FROM AUTHOR]

The construction and application of mathematical models which aid in the determination of fair rates of return for regulated industries is a development of potentially great importance to both the theoretician and the purchaser of regulated industry services. This paper shows that the two apparently dissimilar models of fair rates of return under conditions of growth found in the literature are derivable from a third more general model of such a process. The relative usefulness of the models is discussed, along with the validity of the behavioral assumptions that underlie the models. [ABSTRACT FROM AUTHOR]

In the United States and most industrialized countries, regulatory policies pertaining to food safety, occupational health, and environmental protection are (according to laws and statutes) science based. The complexity of some ecosystems and new technologies, however, makes it increasingly necessary to deal with situations where scientists cannot yet provide a definite picture. In this context, a widely invoked (but debated) rule, known as the Precautionary Principle, says to address potential hazards right away with preventive measures. We develop an intuitive formalization of this rule, which allows us to infer what an appropriate precautionary policy should do. Implications for resource conservation and the regulation of technological risks are then explored. [ABSTRACT FROM AUTHOR]

An earlier and a subsequent study which constructed two sets of social indicators for Charlotte, N.C. during the past two years are here examined and compared as part of an effort directed to the development of a general methodological approach for synthesizing and selecting between various indicators at local government levels. Five measurement tests are used to compare the two sets. The tests are based upon two criteria: correspondence and correctness. Four tests apply the former criterion; one test applies the latter. Although the results show the superiority of the more recent study, the more essential purpose is to illustrate a potentially useful approach to evaluating social indicators which is independent of the local public policy making process and is amenable to computerization. Although many of the tests employed cannot be brought to a completely satisfactory resolution at the present moment, the evaluation methodology can be regarded as a start toward a needed approach to assist systems analysts and local officials concerned with municipal information systems in constructing more reliable and accurate social indicators. [ABSTRACT FROM AUTHOR]

We empirically study how the interplay between entry and subcontracting choices is affected by the use of different auction formats in public procurement. The difference-in-differences strategy used exploits a data set of auctions for public works run alternately under first price and average bid auctions. We find that the use of first price auctions causes a marked decline in both entry and subcontracting. We also find that the type of firms entering first price auctions changes with firms becoming more likely to bid jointly with other firms in ad hoc joint ventures. [ABSTRACT FROM AUTHOR]

The article presents an alternative approach to indicator development in response to an earlier article in the same issue of this publication titled "Comparative Evaluation of Two Sets of Social Indicators," by Emil E. Malizia. The author suggests a different approach to the problem of evaluating or designing indicators by matching indicators to the specifications of managers or public officials. The author suggests that this measurement precision can then used in context. The author's criticism of Malizia's techniques are that they are supply oriented and should be performed in the context of systematic formulation of indicator demand. The author suggests that management science may provide tools for decision makers to develop solutions to demand related indicator issues.

The overuse of its currency processing facilities by depository institutions (DIs) has motivated the Federal Reserve (Fed) to impose its new cash recirculation policy. This overuse is characterized by the practice of cross-shipping, where a DI both deposits and withdraws cash of the same denomination in the same business week in the same geographical area. Under the new policy, which came into effect July 2007, the Fed has imposed a recirculation fee on cross-shipped cash. The Fed intends to use this fee to induce DIs to effectively recirculate cash so that the societal cost of providing cash to the public is lowered. To examine the efficacy of this mechanism, we first characterize the social optimum and then analyze the response of DIs under a recirculation fee levied on cross-shipped cash. We show that neither a linear recirculation fee, which is the Fed's current practice, nor a more sophisticated nonlinear fee is sufficient to guarantee a socially optimal response from DIs. We then derive a fundamentally different mechanism that induces DIs to self-select the social optimum. Our mechanism incorporates a fairness adjustment that avoids penalizing DIs that recirculate their fair share of cash and rewards DIs that recirculate more than this amount. We demonstrate that the mechanism is easy to implement and tolerates a reasonable amount of imprecision in the problem parameters. We also discuss a concept of welfare-preserving redistribution wherein the Fed allows a group of DIs to reallocate (amongst themselves) their deposits and demand if such a possibility does not increase societal cost. Finally, we analyze the impact of incorporating the custodial inventory program, another component of the Fed's new policy. [ABSTRACT FROM AUTHOR]

Researchers in different disciplines have independently found evidence to suggest that the social discount rate may be hyperbolic, rather than exponential, in nature. Both behaviorist research and some empirical economics studies support the hyperbolic discounting hypothesis. U.S. and U.K. government discounting dispensations for some long-run public development projects are explicable in terms of an underlying hyperbolic social discount rate. A statistical aggregation argument demonstrates that even if the behaviorist, economics and public choice evidence for hyperbolic discounting is not conclusive, the social discount rate of a set of people who individually express time preferences best modeled by exponential discounting functions is nonetheless hyperbolic. Further empirical economics studies of discounting preferences are required. Comparisons of different national discounting practices would also be useful to see how widespread is the use of unusually low exponential rates of discount for long-run projects. The application of hyperbolic discounting would have most impact in long-run benefit-cost analyses. However, government agencies would require overwhelming evidence before switching from exponential to hyperbolic discounting. [ABSTRACT FROM AUTHOR]

The Mx/G/1 queueing system is studied under the following two situations: (1) At the end of a busy period, the server is turned off and inspects the length of the queue every time an arrival occurs. When the queue length reaches, or exceeds, a pre-specified value m for the first time, the server is turned on and serves the system until it is empty. (2) At the end of a busy period, the server takes a sequence of vacations, each for a random amount of time. At the end of each vacation, he inspects the length of the queue. If the queue length is greater than, or equal to, a pre-specified value m at this time, he begins to serve the system until it is empty. For both cases, the mean waiting time of an arbitrary customer for a given value of m is derived, and the procedure to find the stationary optimal policy under a linear cost structure is presented. [ABSTRACT FROM AUTHOR]

A three-year case study was conducted of the effects of computer-based decision technology on policy formation, policy implementation, and routine operations in the Federal Coal Management Program. Several methodologies were used, including semistructured interviewing and content analysis. Midway through the interview schedule, program regulations were changed to reflect the different philosophies of the Carter and Reagan administrations, affording the observers an unusual opportunity to study the reactions of the organization to a de-emphasis on analyses and computer applications. Also noteworthy in the case was the emergence of a major public policy dispute which was closely associated with the coal leasing program's changes in use of computer-based economic analysis. We found that computer models had significant but not dominant effects on the workplace environment of most persons working in the program. Nevertheless some applications of computer models had very high visibility and large impacts. [ABSTRACT FROM AUTHOR]

Hazard management of the risks of human injury and death related to the automobile are described and exemplified by the Swedish car manufacturer Volvo. The study presents the Volvo units engaged in accident hazard management and their roles in the elaborate system of feedbacks (information, penalties and rewards) created by the company and society for maintaining a high level of automobile safety. Improvements are suggested although the overall quality of the accident hazard management process is considered quite good. Although the study is focused on the automobile industry, it should be regarded as part of a much-needed wider perspective on hazard management applying to other technologies and industries as well. In general, the following factors are considered important to high quality accident hazard management by companies and society: (1) Public concern about safety issues, (2) technological capacity and organizational tradition of safety engineering in the manufacturing company, (3) routines for announcing future proposed safety standards, e.g., US Federal Register, (4) laws enforcing a recall system, (5) annual vehicle inspections and (6) effective product liability laws. [ABSTRACT FROM AUTHOR]

Health and safety risks are compared with financial risks, and the differences pertinent for risk evaluation and management are described. Such differences arise from the equities of risk distribution, the multiple stakeholders in the decision process, the opportunities for risk diversification, the interpretation of social values relating to risk choices, and in the political objectives in the decision process. Health and safety regulators are faced with the problem of making decisions involving large scientific uncertainties, public perceptions at odds with professional perceptions, uncertain and conflicting public values expressed through the political process, and difficult judgments of equity when risk and benefit are borne by different groups. The effect of highly publicized risk controversies on such regulatory decisions is described. [ABSTRACT FROM AUTHOR]

A model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic (inappropriable) research is suboptimal. Furthermore, provision of seed money is generally counterproductive, while the provision of a matching subsidy is not very cost-efficient in increasing the allocation. Innovative policy alternatives are proposed. [ABSTRACT FROM AUTHOR]

A goal programming model for planning officer accessions to the U.S. Navy from various commissioning sources is developed and described. Present and future requirements for different career specialty areas in the Navy are considered in terms of years of commissioned service and related to various "choke points" where inventories fall short of requirements in officer force structure. An illustration of the use of this model is provided which involves assessments of the effects of phasing out one comissioning source. Other uses and possible further extensions are also indicated for this model, which now forms a part of the Navy's manpower planning procedures. [ABSTRACT FROM AUTHOR]

A model for evaluating alternative sediment control policies in agriculture is formulated such that changes in the production of agricultural commodities among and within 105 agricultural production areas can be analyzed. The model combines the elements of spatial economic equilibrium with physical and technical aspects of cropland agriculture. Five alternative sediment control policies as might be formulated by national environment planning agencies are analyzed. The analysis of the alternative policies do not give a definitive solution to sediment water quality problems but rather provide significant information on technical, regional and cost distributions of agricultural production to help decision makers formulate national sediment control policies. [ABSTRACT FROM AUTHOR]

A mathematical model of a military manpower system is presented which seeks to determine the optimal steady state wage rate and force distribution by length of service. Accessions and retention are the transition parameters of a steady state manpower model and these are assumed to be a function of wages. A productivity function is introduced to measure effectiveness of each force structure. Gradient search is used to find the compensation plan that will produce a long-run force with maximum effectiveness within a given limited annual budget. [ABSTRACT FROM AUTHOR]

This work derives an effluent taxation structure for meeting a specified level of regional environmental quality. It is demonstrated that the nonlinearity of the proposed charge scheme flaunts equilibrium results identical to linear user-charge programs but elicits superior dynamic characteristics. Moreover, through the use of an iterative stimulus-response algorithm we are able to minimize the technical information transfer among sectors by mapping response surfaces for polluter behavior. These continuously updated response patterns are then used to guide the system to a social optimum. Recognizing that the optimal allocation of environmental resources is likely to be a vacillating target, and that the existence of adjustment lags must be reckoned with in any operational context, we argue that meaningful policing of environmental quality will require the nonlinear taxation approach. [ABSTRACT FROM AUTHOR]

A number of concepts and conditions in current city planning are questioned: the grand master plan delusion; planning after the fact; intermittent master planning; the illusion of complete study; avoiding the critical problems; trying to do everything; sematic confusion; conflicts of role and organization; unrealistic derivation of goals and objectives; failure of city planning in the general public interest; deficiencies of planning personnel; inadequacies of theory and research; underestimating fundamental difficulties of the city planning endeavor. [ABSTRACT FROM AUTHOR]