As deregulation and liberalisation has led to the emergence of global financial
markets, banks expanded their international operations and moved into multiple lines
of financial business. They developed complex risk management strategies that have
allowed them to price financial products and hedge their risk exposures in a manner
that improves expected profits, but which may generate more risk and increase
liquidity problems in certain circumstances.
Taxes can affect investment not only through the income and substitution effects related to
saving, but also through a risk-taking effect. The capital gains tax rate has been singled out as
being important to investment. For risk-averse investors, the capital gains tax could act as
insurance for risky investments by reducing the losses as well as the gains—it decreases the
variability of investment returns.
Consequently, a rise in the capital gains top rate could increase
investment because of reduced risk.
In this opening chapter, we outline some of the most influential (and
most contested) definitions of health, and approaches to health promotion.
Although some success has been claimed for health promotion interventions,
in general the results to date have been modest: for example, safer
sex campaigns in preventing HIV infection among gay men. In other areas
efforts have been remarkably disappointing, notably in preventing smoking
uptake among adolescents. ‘Health promotion’ is a term which has
been applied to a very wide range of activities performed in many and
Schmidt and Stolpe Health Economics Review 2011, 1:12 http://www.healtheconomicsreview.com/content/1/1/12
Transitivity in health utility measurement: An experimental analysis
Ulrich Schmidt1,2 and Michael Stolpe1*
Abstract Several experimental studies have observed substantial violations of transitivity for decisions between risky lotteries over monetary outcomes. The goal of our experiment is to test whether these violations also affect the evaluation of health states.
Harmful alcohol consumption is risky both for the drinker and for other people. An
intoxicated person can put people in harm’s way by involving them in trafﬁ c accidents or
violent behaviour, or by negatively affecting co-workers, relatives, friends or strangers.
A survey in Australia found that two thirds of respondents were adversely affected by
someone else’s drinking in the past year. Alcohol consumption also affects society at large.
For instance, critical thinking and decision-making skills are important for analysing and
resisting peer and media influences to use tobacco; interpersonal communication skills
are needed to negotiate alternatives to risky sexual behaviour.
Adverse selection arises from different borrowers having different probabilities
of repayment. Therefore, to maximise expected return, the bank would like to only
lend to borrowers with a high probability of repayment. In order to determine who
the good borrowers are, the bank can use the interest rate as a screening device.
Unfortunately those who are willing to pay high interest rates may be bad borrowers
because they perceive their probability of repayment to be low.