BATTER UP! MORAL HAZARD AND THE EFFECTS OF THE DESIGNATED HITTER RULE ON HIT BATSMEN

American League batters have been hit by pitches 10% to 15% more frequently than National League batters since the designated hitter rule was introduced in 1973. This evidence is consistent with the idea that the American League s adoption of the designated hitter rule created a classic moral hazard problem. Because they are not required to appear at the plate, American League pitchers can throw at opposing hitters with greater impunity (i.e., at lower cost) than National League pitchers who must take their turns at bat and, hence, bear more of the costs of their own actions. (JEL D81, J28)     

CRIME AND PUNISHMENT IN MAJOR LEAGUE BASEBALL: THE CASE OF THE DESIGNATED HITTER AND HIT BATTERS

Past studies have found a positive correlation between the use of the designated hitter in baseball and hit batters, but the reason for this is debatable. Using a new micro‐level data set of individual plate appearances, we control for detailed cost‐benefit attributes that affect the decision calculus of the pitcher to isolate the deterrent impact of requiring the pitcher to bat. We find that pitchers hit batters strategically, and the deterrent effect of requiring pitchers to bat explains 60%–80% of the difference in hit batsmen between leagues. We also identify evidence of direct retaliation against plunking pitchers. (JEL D81, KC42, L83)     

THE WELFARE IMPLICATIONS OF MORAL HAZARD AND ADVERSE SELECTION IN COMPETITIVE INSURANCE MARKETS

I model a competitive insurance market with both moral hazard and adverse selection, and analyze the effect on welfare when both problems are present simultaneously. An examination of the interaction between these two problems leads to two hypotheses. First, the nature of the equilibrium contracts is such that each problem partially offsets the welfare loss associated with the other. And second, the degree to which this occurs increases as agents become more heterogeneous. Simulation results overwhelmingly support both hypotheses.     

THE HAZARDS OF MORAL HAZARD: COMMENT ON GOFF, SHUGHART, AND TOLLISON

Goff et al. [1997] argue that the sharp increase in the number of hit batsmen after the adoption of the designated hitter rule is due to moral hazard. I argue instead that simple changes in the composition of batters faced explains much of the observed effect. Pitchers are bad hitters and therefore are much less likely to be hit than their designated hitters. Furthermore, there is no correlation between the frequency with which individual pitchers hit opposing batsmen and their personal likelihood of being hit by a pitch while batting, contrary to the predictions of the moral hazard model. ( JEL D81, J28)     

MORAL HAZARD, ASSET SPECIFICITY, IMPLICIT BONDING, AND COMPENSATION: THE CASE OF FRANCHISING

In franchising, many of the elements of moral hazard models merge. Issues of two-sided moral hazard, bonding, and asset specificity all play a role. We extend the literature by considering how asset specificity creates an implicit bond and affects incentive pay. This approach implies that if one party posts a larger bond, this improves their incentives and allows enhancement of the other party's incentives through a larger residual income claim. Our empirical work supports this approach. For example, reductions in the specificity of the franchisee's investment due to leasing lowers the royalty rate and raises the franchise fee. (JEL L14, 533)     

KNIGHT'S "MORAL HAZARD" THEORY OF ORGANIZATION

In this paper I suggest that besides Knight's well recognized "uncertainty" explanation of the firm, he had another one. "Moral hazard" is the central feature in the second, largely overlooked theory. I argue, and attempt to document, that this theory is not a chance excursion but is rather quite well developed by Knight.     

EFFECTS OF EXPOSURE ON PREVALENCE AND CUMULATIVE RELATIVE RISK: DIRECT AND INDIRECT EFFECTS IN A RECURSIVE HAZARD MODEL

This paper outlines decomposition methods for assessing how exposure affects prevalence and cumulative relative risk. Let     x     denote a vector of exogenous covariates and suppose that a single dimension of time   t   governs two event processes     T ₁  and   T ₂.    If the occurrence of the event     T ₁    determines entry into the risk of the event     T ₂,    then subgroup variation in     T ₁    will affect the prevalence     T ₂,    even if subgroups in the population are otherwise identical. Although researchers often acknowledge this phenomenon, the literature has not provided procedures to assess the magnitude of an exposure effect of     T ₁    on the prevalence of     T ₂.    We derive decompositions that assess how variation in exposure generated by direct and indirect effects of the covariates     x     affect measures of absolute and relative prevalence of     T ₂.    We employ a parametric but highly flexible specification for baseline hazard for the     T ₁  and   T ₂    processes and use the resulting parametric proportional hazard model to illustrate the direct and indirect effects of family structure when     T ₁    is age at first sexual intercourse and     T ₂    is age at a premarital first birth for data on a cohort of non-hispanic white U.S. women.     

THE COMMON POOL, BARGAINING, AND THE RULE OF CAPTURE

Firms producing from a single oilfield face the common-pool problem: how to divide production and profits among themselves. The rule of capture creates competition among them to produce the oil before anyone else does, and a tendency for overproduction. Private bargaining among the firms can avoid the wasteful production practices associated with the rule of capture and increase joint profits. This paper explores the structure and expected outcome of the common-pool problem, and demonstrates that smaller producers hold a bargaining advantage that is not easily overcome by larger producers or neutral arbitrators.     

THE MORAL COSTS OF NASTINESS

We introduce two variants of the one‐shot joy‐of‐destruction minigame (mini‐JOD). Two players are endowed with the same amount of money. They simultaneously decide whether or not to reduce the other player's payoff at an own cost. In one treatment there was a probability that nature would destroy the opponent's money anyway. We test whether this feature reduces the moral costs of nastiness, and find that destruction rates rise significantly, despite the absence of strategic reasons. (JEL C72, C91, D03)     

CONVEX COSTS AND THE MERGER PARADOX REVISITED

Returning to the contention that convex costs provide a resolution to the merger paradox, we show that for reasonable degrees of convexity, the minimum market share needed for merger to be profitable remains close to that associated with linear costs. Moreover, convex costs do not eliminate the free rider problem identified as part of the merger paradox. Finally, we retain convex costs while modeling a firm-by-firm sequential merger process, showing that the paradox constrains a larger share of potential mergers. These findings help reduce the relevance of convex costs as a resolution to the merger paradox. ( JEL L12, L13)     

HOW HEALTH INSURANCE AFFECTS HEALTH CARE DEMAND—A STRUCTURAL ANALYSIS OF BEHAVIORAL MORAL HAZARD AND ADVERSE SELECTION

Individuals with health insurance use more health care. One reason is that health care is cheaper for the insured. Additionally, having insurance can encourage unhealthy behavior via moral hazard. Previous work studying the effect of health insurance on medical utilization has mostly ignored behavioral changes due to having health insurance, and how that in turn affects medical utilization. This paper investigates the structural causal relationships among health insurance status, health behavior, and medical utilization theoretically and empirically, and separates price effects from behavioral moral hazard effects. Also distinguished are the extensive versus intensive margins of insurance effects on behavior. (JEL C51, I12, D12)     

LIMITED LIABILITY,MORAL HAZARD,AND RISK TAKING: A SAFETY NET GAME EXPERIMENT

We model the safety net problem as a social dilemma game involving moral hazard, risk taking, and limited liability. The safety net game is compared to both an individual decision task involving full liability and the deterministic public goods game. We report experimental data to show that limited liability leads to higher risk taking in comparison to full liability; nevertheless, the difference is much smaller than predicted by theory. In the safety net game, subjects behave as if socially responsible for the losses they impose on the group. With repetition, nevertheless, a gradual emergence of the moral hazard problem arises. (JEL C9, D7, D8, H4, I1, I3)     

AESTHETICS AND PRAGMATICS OF FAMILY THERAPY REVISITED

After reacting specifically to Simon's (1992) proposal for the integration of first and second-order therapies, I note how he, as well as Anderson and Goolihian (1988, 1990), focus primarily on deliberate, intentional ways to promote a respectful stance in therapy. Although a consideration of which intentional stances and strategies will promote the most helpful conversations in therapy is important, an even more critial question concerns the possible limitations of intentional efforts and the relation of conscious mind to other natural orders of mind in the living world. I suggest that deliberate efforts on the part of theapists toward any intended therapeutic outcomes must be comlemented by instictive and intuitive ways of participating with clients.     

TAXONOMY AND THE EFFECTS OF FISCAL AND MONETARY POLICY

This paper reviews the development of monetarist theory and the circumstances under which emphasis shifted to "fiscalism," discusses Bent Hansen's view that the controversy is largely a sham dispute, and suggests two types of research needed to assess, historically and theoretically, the relative practical importance of the two approaches to reduction or elimination of economic instability.     

MYTHOLOGIES REVISITED: ROLAND BARTHES AND THE LEFT

This essay arises from the author's scepticism about the received notion, prevalent both in literary and cultural studies, that Roland Barthes's work of the 1960s constituted an abandonment of the previous decade's social critique. The paper develops the argument that, to the contrary, understanding Barthes's socio-cultural development following World War II and in the French cultural context helps to situate the political engagement of his writings in the 1950s and to clarify the continued political commitment of this work from the 1960s onward. This essay addresses a series of questions: what was Barthes's relationship to the 1950s French intelligentsia that prepared his active participation in the heterodoxical Marxist journal, Arguments, a forum for many of the urgent intellectual debates between 1956-62? What is the relationship of this activity to his writings of the early 1950s, developed into Mythologies in 1957, as well as to the shift toward semiology and structuralism and to the purported abandonment of social critique betokened by this shift? How do these phases inform the different readings of Barthes's work developed in more recent interpretations of his writing? It is argued that we would do better to view the structuralist phase and especially the ‘later’ Barthes (from the late 1960s onward) more fully and deliberately in relation to the early, explicitly political period. This revised perspective, one not limiting Barthes to works such as Mythologies, will help us better comprehend Barthes's continuing legacy for sociosemiotic critique both in literary criticism and in cultural studies and to create new ground for interdisciplinary dialogue that is very much needed in an era of questioning the limits and borders of this field.