Simulation as a research tool in management studies

Simulation is still rarely used by management researchers, particularly those who study business and other systems as social rather than technical or mechanical entities. Why? This article explores this question. The validation issue in simulation research and several examples of good simulation practice are discussed. The main reasons for the low status of simulation research in management studies are: the emphasis on academic specialization rather than craftsmanship, the complicated systems rather than complex systems viewpoint, and the paradigm of the empirical sciences rather than design sciences which prevails in management studies.     

Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance

Traditional insurance contracts do not offer protection against the replacement value of a vehicle. A replacement cost endorsement gives the opportunity to get a new vehicle in the case of a total theft or in the case of total destruction of the car in a road accident. This type of protection was introduced in Canada in the late 1980's. It is also offered in France and many insurers in the United States are going to move in that direction. We propose tests that separate moral hazard from adverse selection in the analysis of the effect of this additional protection on car theft. We show that holders of car insurance policies with a replacement cost endorsement have a higher probability of theft near the end of this additional protection (usually 24 months following the acquisition of a new car). Our tests indicate that this result is a form of ex post moral hazard or opportunistic insurance fraud.     

Lottery Decisions and Probability Weighting Function

This article analyzes the implications of basic lottery tests for the probability weighting function w(p). We first show that the w(p) function with one argument cannot accommodate three basic tests of lottery choice. We also discuss in detail the links between the w(p) function with one argument and the preference reversal paradox. In the last section we propose an evaluation function that accommodates the restrictions imposed by the tests and we provide an example of such function.     

The GED certificate and the poverty status of adult women

Are women who hold a General Educational Development (GED) certificate less likely to ever be in poverty? Using data from the National Longitudinal Survey of Youth, this study examines the probability of entering poverty for women. Given that a woman is poor, the study also examines the probability of exiting poverty. The analysis differentiates between high school dropouts, GED certificate holders, and high school graduates, and it is restricted to the first entry into poverty and the first exit out of poverty. In general, the results show that the GED certificate may be an economically beneficial route for women to achieve short-term earnings growth and remain out of poverty, as compared to dropping out of high school. The analysis shows that women with a GED certificate have a significantly higher probability of entry into poverty than high school graduates. However, a GED certificate increases the probability that a woman will exit poverty, compared to high school dropouts. This finding differs from other studies about the economic impact of the GED certificate.     

Insurance with undiversifiable risk: Contract structure and organizational form of insurance firms

Previous explanations of the contract choice and organizational form of insurance firms do not explain, by themselves, the recent proliferation of mutuals and new contract designs. We first present risk-bearing arguments to address these phenomena. We present two forms of insurance. The first is a conventional transfer of risk whereas the second decomposes risk between idiosyncratic and nonidiosyncratic. We show that the latter form leads to more active trade in insurance markets with correlated exposures. Moreover, the decomposed form dominates the simple transfer. These results qualify and extend the work of Borch (1962) and Marshall (1974). Market responses to the recent liability insurance crisis are compatible with these predictions.This research was conducted while G. Dionne was visiting the University of Pennsylvania under grants from Huebner Foundation and CRSH Canada. N. Doherty wishes to acknowledge with thanks support from the National Science Foundation under grant #88-09299. We wish to thank Patricia Danzon, Beverly Dahlby, Claude Fluet, James Garven, Scott Harrington, Howard Kunreuther, Clifford Smith Jr., George Theall, Kip Viscusi, and a referee for helpful comments.     

The decommodified security ratio: A tool for assessing European social protection systems

With a view to better assessment of the roles played by social security and social policy in determining well-being, this article introduces the "decommodified security ratio" (DSR), an instrument for evaluating an important duty of the social State, namely to maintain and improve people's economic security. To that end we describe the conventions for its use, analyse its main components in 20 European countries in 2002 and simulate the changes in it produced by ten variations in those components. From an analysis of the sensitivities of economic security we then demonstrate three different rationales.