Copyright (c) 2008 All rights reserved. http://works.bepress.com/darius_lakdawalla Recent documents in Darius N. Lakdawalla en-us Sun, 30 Nov 2008 09:10:48 PST 3600 http://works.bepress.com/darius_lakdawalla/37 http://works.bepress.com/darius_lakdawalla/37 Thu, 28 Feb 2008 15:06:51 PST Self-control devices, such as rehabilitation programs, group commitment, and informal fines, can make time-inconsistent smokers better off. Health economists have used this result to argue in favor of cigarette taxes that restrain smoking. However, taxes alone are not Pareto-improving overall, because they benefit today's smoker at the expense of her future selves, who have less demand for self-control. We suggest an alternative class of taxation policies that provide self-control and benefit a smoker at every point in life. Smokers could be allowed to purchase smoking licenses' when they start to smoke, and in exchange commit their future selves to face compensated cigarette taxes. We show that this scheme which could be made voluntary improves the welfare of current and future smokers, generates positive revenue for the government, and can be made incentive-compatible. Similar schemes can also be envisioned to address problems of time-inconsistency in other contexts. Jay Bhattacharya Other Topics http://works.bepress.com/darius_lakdawalla/36 http://works.bepress.com/darius_lakdawalla/36 Thu, 28 Feb 2008 14:48:40 PST Background: Recent work has shown that rates of severe disability, measured by the inability to perform basic activities of daily living, have been rising in working age populations. At the same time, the prevalence of important chronic diseases has been rising, while others falling, among working age populations. Chronically ill individuals are more likely than others to have activity of daily living limitations.Objective: We examine the extent to which chronic disease trends can explain these disability trends.Data: We use nationally representative survey data from the 1984-1996 National Interview Survey, which posed a consistent set of questions regarding limitations in activities of daily living over that period.Methods: We decompose trends in disability into 2 parts--1 part due to trends in the prevalence of chronic disease and the other due to trends in disability prevalence among those with chronic disease.Results: Our primary findings are that for working age populations between 1984 and 1996: (1) disability prevalence fell dramatically among the nonchronically ill; (2) rising obesity prevalence explains about 40% of the rise in disability attributable to trends chronic illness; and (3) rising disability prevalence among the chronically ill explains about 60% of the rise in disability attributable to trends in chronic illness.Conclusions: Disability prevention efforts in working age populations should focus on reductions in obesity prevalence and limiting disability among chronically ill populations. Given the rise in disability among these population subgroups, it is unclear whether further substantial declines in elderly disability can be expected.Key Words: disability trends, chronic disease trends, decomposition methods Jay Bhattacharya Disability and Long-Term Care http://works.bepress.com/darius_lakdawalla/35 http://works.bepress.com/darius_lakdawalla/35 Thu, 28 Feb 2008 14:26:33 PST Rewarding inventors with inefficient monopoly power has long been regarded as the price of encouraging innovation. Public prescription drug insurance escapes that trade-off and achieves an elusive goal: lowering static deadweight loss, while simultaneously encouraging dynamic investments in innovation. As a result of this feature, the public provision of drug insurance can be welfare-improving, even for risk-neutral and purely self-interested consumers. In spite of its relatively low benefit levels, the Medicare Part D benefit generate $3.5 billion of annual static deadweight loss reduction, and at least $2.8 billion of annual value from extra innovation. These two components alone cover 87% of the social cost of publicly financing the benefit. The analysis of static and dynamic efficiency also has implications for policies complementary to a drug benefit: in the context of public monopsony power, some degree of price-negotiation by the government is always strictly welfare-improving, but this should often be coupled with extensions in patent length. Darius Noshir Lakdawalla Innovation Health Insurance http://works.bepress.com/darius_lakdawalla/34 http://works.bepress.com/darius_lakdawalla/34 Mon, 06 Nov 2006 16:14:46 PST This paper analyzes the normative role for civil liability in aligning terrorism precaution incentives, when the perpetrators of terrorism are unreachable by courts or regulators. We consider the strategic interaction among targets, subsidiary victims, and terrorists within a sequential, game-theoretic model. The model reveals that, while an "optimal" liability regime indeed exists, its features appear at odds with conventional legal templates. For example, it frequently prescribes damages payments from seemingly unlikely defendants, directing them to seemingly unlikely plaintiffs. The challenge of introducing such a regime using existing tort law doctrines, therefore, is likely to be prohibitive. Instead, we argue, efficient precaution incentives may be best provided by alternative policy mechanisms, such as a mutual public insurance pool for potential targets of terrorism, coupled with direct compensation to victims of terrorist attacks. Darius Noshir Lakdawalla Terrorism Risk and Insurance http://works.bepress.com/darius_lakdawalla/33 http://works.bepress.com/darius_lakdawalla/33 Fri, 22 Sep 2006 16:10:39 PDT Darius Noshir Lakdawalla Terrorism Risk and Insurance http://works.bepress.com/darius_lakdawalla/32 http://works.bepress.com/darius_lakdawalla/32 Fri, 22 Sep 2006 16:05:53 PDT Darius Noshir Lakdawalla Obesity and Body Weight http://works.bepress.com/darius_lakdawalla/31 http://works.bepress.com/darius_lakdawalla/31 Fri, 22 Sep 2006 16:01:07 PDT Darius Noshir Lakdawalla Obesity and Body Weight http://works.bepress.com/darius_lakdawalla/30 http://works.bepress.com/darius_lakdawalla/30 Fri, 22 Sep 2006 14:26:44 PDT Patent protection spurs innovation by raising the rewards for research, but it usually results in less desirable allocations after the innovation has been discovered. In effect, patents reward inventors with inefficient monopoly power. However, previous analysis of intellectual property has focused only on the costs patents impose by restricting price-competition. We analyze the potentially important but overlooked role played by competition on dimensions other than price. Compared to a patent monopoly, competitive firms may engage in inefficient levels of non-price competition-such as marketing-when these activities confer benefits on competitors. Patent monopolies may thus price less efficiently, but market more efficiently than competitive firms. We measure the empirical importance of this issue, using patent-expiration data for the US pharmaceutical industry from 1990 to 2003. Contrary to what is predicted by price competition alone, we find that patent expirations actually have a negative effect on output for the first year after expiration. This results from the reduction in marketing effort, which offsets the reduction in price. The short-run decline in output costs consumers at least $400,000 per month, for each drug. In the long-run, however, expirations do raise output, but the value of expiration to consumers is about 15% lower than would be predicted by a model that considers price-competition alone, without marketing effort. The non-standard effects introduced by non-price competition alter the analysis of patents' welfare effects. Darius Noshir Lakdawalla Innovation http://works.bepress.com/darius_lakdawalla/29 http://works.bepress.com/darius_lakdawalla/29 Fri, 22 Sep 2006 14:23:30 PDT Monopolies appear throughout medical care markets, as a result of patents, limits to the extent of the market, or the presence of unique inputs and skills.  Economists typically think of such monopolies as necessary evils or even pure inefficiencies.  However, in the health care industry, the deadweight costs of monopoly may be much smaller or even absent.  Health insurance, frequently implemented as an ex ante premium coupled with an ex post co-payment per unit consumed, operates as a two-part pricing contract.  This allows monopolists to extract consumer surplus without inefficiently constraining quantity.  This view of health insurance contracts has several novel implications:  (1) Medical care monopolies may have smaller or no deadweight costs in the goods market, because insured consumers face low co-payments; (2) Since monopolists have incentives to seek low co-payments, price regulation of health care monopolies is inferior to laissez-faire or simple tax-and-transfer schemes that redistribute monopoly profits; and (3) Competitive health insurance markets or optimally designed public health insurance can eliminate static losses in the goods market while still improving dynamic efficiency in the innovation market. Darius Noshir Lakdawalla Health Insurance http://works.bepress.com/darius_lakdawalla/25 http://works.bepress.com/darius_lakdawalla/25 Fri, 22 Sep 2006 12:22:17 PDT Darius Noshir Lakdawalla Obesity and Body Weight