Andrew N. Kleit

MEASURING POTENTIAL EFFICIENCY GAINS FROM DEREGULATION OF ELECTRICITY GENERATION: A BAYESIAN APPROACH

This paper examines the efficiency of electric power generation plants in the United States. A 1996 data set from the Utility Data Institute and county-level wage data from the Bureau of Labor statistics provide the information needed to construct measures of cost, output, and input prices for 78 steam plants using natural gas as the primary fuel. This paper uses a Bayesian stochastic frontier model that imposes concavity and monotonicity restrictions implied by microeconomic theory to measure efficiency, price elasticities, and returns to scale of these plants. Results indicate that plants on average could reduce costs by up to 13 by eliminating production inefficiency. Results also indicate that most plants operate at increasing returns to scale, suggesting further cost savings could be achieved through increasing output.

A Laboratory Study of the Benefits of Including Uncertainty Information in Weather Forecasts

Abstract Modern operational methods of numerical weather prediction, such as “ensemble forecasting,” allow assessments of state-dependent predictability to be made. This means that forecast-specific estimates of the forecast standard errors are possible. Quantitative estimates of forecast uncertainty are often not communicated to the public as it is unclear what the value of this information will be to people who must make weather-dependent decisions. Using laboratory-based methods developed by experimental economists to study individual choice it is found that nonspecialists are able to make better decisions that increase their expected reward while reducing their exposure to risk, when provided with information about the day-to-day uncertainty associated with temperature forecasts. The experimental framework used herein may provide a useful tool for evaluating the effectiveness with which weather forecasts can be communicated to end users.

The Effect of Annual Changes in Automobile Fuel Economy Standards

Since 1978 the Federal government has regulated the fuel economy of new cars sold in the United States. The purpose of Corporate Average Fuel Economy (CAFE) standards is to lessen the national dependence on foreign oil. Through the use of theoretical and empirical models this paper examines the impact of CAFE standards on the automobile industry and on energy consumption. It is shown that CAFE standards may or may not save energy. If CAFE does save energy, it does so at a prohibitive cost to the economy. CAFE standards are also shown to have a number of perverse impacts on the automobile industry as well as consumers.

Stochastic Frontier Estimation Of Cost Models Within The Hospital

Assessing the impact of new technologies on health care costs is an important research area. This paper evaluates two technologies used to treat coronary artery disease. We estimate two separate stochastic frontier modelsone for balloon angioplasty patients and one for cardiac bypass surgery patientusing data taken from detailed chart and cost files of a large urban hospital. Cost estimates for the two technologies are purged of inefficiency so that forecasts of the cost consequences of technology shift can be based on best-practice production techniques. Learning behavior, physician effects, and patient clinical characteristics are also taken into account. We find that there are potential cost savings associated with making angioplasty a more perfect substitute for bypass surgery, as well as current inefficiency in production.

Did Open Access Integrate Natural Gas Markets? An Arbitrage Cost Approach

Several studies, using analyses that measure the correlation between prices in various markets, have argued that deregulation of natural gas pipeline contracts has reduced the transaction costs between natural gas markets. Correlations approaches, however, have potentially serious problems. Given these problems, this article estimates transactions costs directly. Deregulation is found to have lowered transactions costs to and from the Louisiana, Oklahoma, and Texas regions, but increased transactions costs from the Rocky Mountain area. Deregulation of pipeline contracts, by lowering the cost of using the market and therefore increasing demand for pipeline capacity, may therefore have differential impacts upon transactions costs between markets. This study implies that the transactions cost approach may be able to overcome several difficulties inherent in the correlations approach.

Environmental Protection, Agency Motivations, and Rent Extraction: The Regulation of Water Pollution in Louisiana

Direct environmental regulation has been in place in the United States for more than twenty-five years. Yet there has been little study of what actually affects regulatory enforcement levels. This study examines enforcement issues by focusing on water quality enforcement by the Louisiana Department of Environmental Quality. The study finds that penalties are more likely to occur, and are likely to be higher, the more serious a firms violation of a regulation. Penalties are also more likely, and likely to be higher, if a firm has a previous record of environmental violations. In contrast to other studies, however, we do not find that enforcement varies across regional offices. In addition, we did not find any systematic effects of the Weingast and Moran (1983) theory of legislative dominance. We did, however, find evidence of rent extraction, along the lines of McChesney (1987; 1991).

Cogeneration and electric power industry restructuring

In 1978, Congress passed the Public Utilities Regulatory Policies Act (PURPA) in response to the energy crisis of the early 1970s. One of the unintended results of PURPA has been to show that electric generation was not a natural monopoly and could be opened to competition. Both the theoretical and empirical determinants of cogeneration and how they may be affected by future electric power industry restructuring are important for future industrial generation decisions. This paper explores these determinants and identifies differences between industrial cogenerators which sell power back into the electricity grid (commercial generators) and those which keep all of their electricity generation for internal purposes (self generators). The empirical results indicate that increases in industrial firm technical capabilities tends to increase their probabilities of both commercial and self generating. In addition, the models indicate that increases in retail electricity prices and industrial output increases industrial generation probabilities. The ability to switch fuels enhances industrial generation probabilities, as does a decrease in the price of natural gas. The results also imply that under electric restructuring a number of industrial generators may find that they face a stranded cost problem much like the one faced by their electric utility counterparts.

Patient and physician satisfaction in a clinical study of telemedicine in a hypertensive patient population.

We studied patient and physician satisfaction with telemedicine for the care of a hypertensive population. Once recruited, participants were seen both in person and via telemedicine (in random order) on the same day. After each meeting, patient and physician satisfaction surveys were completed. In the 12-month study, there were 107 pairs of visits. The physicians reported a small but significant increase in workload, mental effort, technical skills and visit duration for telemedicine when compared with face-to-face consultations. They noted that the telemedicine system worked well in the majority of cases and could reduce the need for future treatment. Patients reported slightly but significantly higher satisfaction scores for the following for in-person than for telemedicine meetings: technical quality, interpersonal care and time spent. Patients reported high satisfaction scores for both telemedicine and in-person visits.

MARKET FAILURE OR MARKET EFFICIENCY?: EVIDENCE ON AIRPORT SLOT USAGE.

Abstract Beginning in 1986, the FAA has allowed the rights to take off or land at the four “High Density Traffic Airports” (HDTAs), known as “slots,” to be sold or traded for any consideration. Opponents of this system have alleged that the slot markets are prone to various forms of “market failure.” The main allegations have been that dominant carriers at the HDTAs have been “hoarding” slots in order to generate higher than competitive prices for airline services. This article attempts to test empirically the various anticompetitive hoarding hypotheses by examining slot ownership and usage data at the most concentrated HDTA, Chicagos O’Hare airport. In general, we find a positive and significant relationship between the rate at which a carrier uses a slot and the carriers market share. This is consistent with a theory of efficient use of slots by carriers owning a large share of the slots at a HDTA. In addition, there is no evidence that the two largest carriers are using leasing as an anticompetitive device. On the other hand, our results concerning capacity usage are consistent with both hoarding and efficiency hypotheses. Taken as a whole, however, the statistical evidence presented here is more consistent with the hypothesis that efficiency considerations were generating concentration at O’Hare.

False Positive Mammograms and Detection Controlled Estimation

OBJECTIVE To investigate the causes of false positive in mammograms. DATA SOURCES Secondary data collected from extracts from computerized medical records from 1999 from five thousand patients at a single hospital in a medium-sized Southern city. STUDY DESIGN Retrospective analysis of electronic medical data on screening and diagnostic mammograms. Detection-controlled estimation (DCE) was used to compare the efficacy of alternative readers of mammogram films. Analysis was also conducted on follow-up exams of women who tested positive in the first stage of investigation. Key variables included whether the patient had had a prior mammogram, age of the patient, and identifiers for the individual physicians. DATA COLLECTION/EXTRACTION METHODS Hospital maintains electronic medical records (EMR) on all patients. Extracts were performed on this EMR system under the guidance of clinical expertise. Data were collected for all women who had mammograms in 1999. Random samples were employed for screening mammograms, and all data was used for diagnostic mammograms. PRINCIPAL FINDINGS Study results imply that access to a previous mammogram greatly reduces the incidence of false positives readings. This has important consequences for benefit-cost, and cost-effectiveness analysis of mammography. Were previous mammograms always available, the results imply the number of false positives would decrease by at least half. The results here also indicate that there is no reason to believe this decrease in false positive would be accompanied by an increase in the number of false negatives. Other attributes also affected the number of false positives. Mondays and Wednesdays appear to be more prone to false positives than the other days in the week. There is also some disparity in false positive outcomes among the five physicians studied. With respect to detection-controlled estimation, the results are mixed. With follow-up data, the DCE estimator appears to generate reasonable, robust results. Without follow-up data, however, the DCE estimator is far less precise. CONCLUSIONS Study results imply that access to a previous mammogram reduces by at least half the incidence of false positives readings. This has important consequences for benefit-cost, and cost-effectiveness analysis of mammography.