Health insurance premia on ACA exchanges are rising

Premiums for Health Insurance Bought on Exchanges to Climb in 2016
by: Stephanie Armour
Oct 27, 2015
Click here to view the full article on WSJ.com

TOPICS: Health Economics, Insurance

SUMMARY: The Obama administration said many consumers will see noticeable premium increases when buying coverage on insurance exchanges in 2016, acknowledging what many health-care experts had predicted.

CLASSROOM APPLICATION: Students can enumerate the possible reasons for increases in health insurance premiums: increases in health care costs; and changes in the health statuses of the insurance pools. "The law requires companies to sell policies to anyone regardless of their medical history, and with only limited variations on premiums. Insurers, who have priced plans for 2016 in part based on what they experienced in 2015, also faced higher costs in part due to rising prescription-drug prices, and they saw lower-than-expected payouts from a federal program that aims to offset carriers' risk by providing funds to companies with costlier, sicker consumers."

QUESTIONS: 
1. (Introductory) Why are health insurance companies raising premiums? Do the substantial increases in premiums indicate the Affordable Care Act has failed in reducing the cost of health care?

2. (Advanced) What is the effect on health insurance premiums of the Affordable Care Act's requirement that insurance companies must sell policies to anyone regardless of their medical history, and with only limited variations on premiums?

3. (Advanced) What is the effect of increases in health insurance premiums on the ability of low-income households to purchase coverage?

What determines how far a real-estate agent will drive to show a house?

Pricey Gas Leads to Lower Home Prices 
by: Adam Bonislawski
Oct 23, 2015
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: When the cost to fill a tank is high, real-estate agents won't drive as far to market a property, concludes a paper by two universities. From the related article: "A recent study in the Journal of Housing Research from faculty at Longwood University in Farmville, Va., finds that for every mile between a property and its listing agent's office, average time on the market goes up 0.36% and the overall likelihood of selling goes down 0.5%. To put that in more concrete terms: Taking two equivalent houses-one down the block from its listing agent and the other 15 miles away-the one farther away will take roughly 5% longer to sell and has a 7.5% lower chance of selling at all." Evidently, according to the author's new paper, as gasoline prices increase, this distance-from-the-office effect is exacerbated.

CLASSROOM APPLICATION: Students can evaluate the effect of gasoline prices on the willingness of real estate agents to show homes that are further from their offices and therefore on the prices of these homes. One interesting issue is whether this gasoline-price effect is larger for younger real estate agents.

QUESTIONS: 
1. (Introductory) What is the effect of an increase gasoline prices on the willingness of real estate agents to show homes?

2. (Advanced) When deciding whether to show homes that are closer to their offices or ones that are further away, why would less-experienced agents be more influenced than experienced ones by increases in gasoline prices?

3. (Advanced) What is the effect of increases in gasoline prices on homes that are closer to job centers and ones that are further from job centers?

Prediction markets

http://restud.oxfordjournals.org/content/early/2015/05/13/restud.rdv014.abstract

Does "death spiral" = "lemons market"?

http://nypost.com/2015/10/19/obamacare-is-entering-its-dreaded-death-spiral/

"Free" shipping

More Retailers Offering Free Shipping on Returns
by: Loretta Chao
Oct 12, 2015
Click here to view the full article on WSJ.com

TOPICS: Marketing

SUMMARY: Retailers are making free returns available to more online customers, delighting consumers but raising costs for the companies.

CLASSROOM APPLICATION: Instructors can present three points about the article. First, the choice whether to offer free shipping on online returns may be a prisoner's dilemma. Second, they can also highlight the point that a current costly decision (to offer free shipping on online returns) may have future benefits (retaining customers). Third, because "free shipping" is not free, consumers may be higher prices when the policy is implemented, which means that consumers who tend not to return products may be made worse off by the policy.

QUESTIONS: 
1. (Advanced) Consider a game in which each of two online retailers decides whether to offer free shipping on returns. Suppose each retailer's payoffs are the following: 10 if both retailers offer free shipping; 15 if the retailer offers free shipping, but the competitor does not; 5 if the competitor offers free shipping, but the retailer does not; and 12 if neither retailer offers free shipping. What type of game are the retailers playing? What is the Nash equilibrium of the game? What is the dilemma in the game?

2. (Introductory) What is the long-term effect to a retailer of a customer having to pay to return a product to the retailer?

3. (Advanced) No shipping is "free." Classify the type of consumer who is made better off by the offer of free shipping for online returns and the type of consumer who might be made worse off.

Reviewed By: James Dearden, Lehigh University

What behaviors does tipping induce?

http://qz.com/524279/a-new-york-restaurant-empire-is-finally-ending-the-injustice-of-tipping/

Writing Well

I am not the only person concerned about poor writing in business: http://qz.com/522824/jack-dorseys-jargon-free-firing-memo-edited-to-remove-the-jargon/. 

I think that the suggested revisions improve the memo and that additional revisions would make it even better. Additional revisions would improve the focus of the memo and replace colloquialisms with plain speech. Follow this link to see the additional revisions I suggest: https://docs.google.com/document/d/1knMJUDHD4tbNqiBPmCbKNLFKWEDId_2hQqD2qFXGJNg/edit?usp=sharing.

Lock-in

http://readwrite.com/2015/10/08/amazon-web-services-cloud-ambitions

Prediction markets

Here is a post about a way for firms to get good information about the profitability of offering a new product or process: http://marginalrevolution.com/marginalrevolution/2015/10/corporate-prediction-markets-work-well.html. Economists like prediction markets because they align the incentives of the bettor and the person seeking information and because price is a good summary of the publicly available information.

RAP

Signals

http://managerialecon.blogspot.com/2015/09/good-video-on-signalling.html

Asymmetric information

Snapchat

https://blog.joemanna.com/progressive-snapshot-review/

Asymmetric information

Incentives?

Whose interests are served when a Board rejects an offer as too low when the offer exceeds the current market value? http://www.reuters.com/article/2015/10/06/us-sabmiller-results-idUSKCN0S00O320151006

The largest shareholder likes the deal: http://www.bloomberg.com/news/articles/2015-10-07/ab-inbev-bids-104-billion-for-sabmiller-after-offers-rejected.

Follow up: http://money.cnn.com/2015/10/13/investing/ab-inbev-sabmiller-beer-merger/index.html.

RAP