This dissertation develops variants of the well-known Hotelling’s location model to examine the nature of competition in the audit market where audit firms make strategic specialization and pricing decisions. In a multi-period spatial oligopoly model of auditing competition, audit firms obtain market power through their service specialization with respect to client characteristics relevant to audit production. This market power allows audit firms to price discriminate among clients. Competition among audit firms is localized: an audit firm optimally charges a client, to whom it has the lowest auditing cost to serve, the marginal auditing cost of the second lowest-cost audit firm. These equilibrium audit firms’ pricing strategies result in an allocation of clients’ surplus and audit firms’ profits that lies in the core of the economy. The existence of a specialization-pricing equilibrium is also established. In equilibrium, given its rivals’ specializations, each audit firm’s profit is maximized by choosing a specialization that maximizes the social welfare (the sum of clients’ surplus and audit firms’ profits). Moreover, audit firms never choose the same specialization in equilibrium. Instead, in order to earn rents as ‘local monopolists’, audit firms differentiate themselves from each other. This result is consistent with a widely held notion that audit firms search for ‘niche’ markets, such as industry specialization, to increase their profits. The dissertation then focuses on a two-period spatial duopoly model in which the market power created by audit firm specialization is now further fortified by the presence of auditors’ learning and clients’ switching costs. In this case, audit firms optimally price discriminate among clients by offering them ‘specialization-and-relationship-specific’ audit fee schedules. The practice of ‘low-balling’ is found to be a natural consequence of the competition among audit firms. However, low-balling occurs only in a certain market segment where audit firms compete quite fiercely. The analysis also demonstrates how equilibrium audit fee schedules, audit firms’ specializations and profits, clients’ surplus, and social welfare depend on the auditing costs, the learning rate, and the switching costs. Some interesting policy implications are illustrated. Finally, the model is used to analyze the impact of banning audit firms from the practice of low-balling. It is demonstrated that even though a policy of banning low-balling always reduces competition, it improves social efficiency in some cases.

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Research into the democratic peace (DP) proposition has shown that democracies rarely, if ever, fight wars against each other. At the same time, rational choice models predict that there will sometimes be circumstances in which war is a rational option for rational states. If democratic states are rational, then war between them should, theoretically, be an option that is exercised. This thesis examines the possibility of Democratic Peace (DP) Breakdown, whereby the causal factors responsible for democratic peace fail to operate properly and war between democracies becomes either likely or inevitable. Applying a game theoretic model of asymmetric deterrence and the concepts of communication and commitment problems in crisis bargaining, the author shows that there is a strong deductive argument for DP Breakdown. / This thesis will attempt to show that a strong deductive argument can be made for deterrence failure between democracies embroiled in an international crisis. While most research into the democratic peace is concerned with identifying and explaining how and why democratic peace succeeds, this thesis will develop a counter-intuitive theoretical approach for understanding how and why democratic peace fails. By doing so it is expected that a greater understanding of the behavioral dynamics of democratic peace will be developed. The argument developed here will draw on the theoretical works of Fearon and Kilgour & Zagare and attempt to bridge the gap between democratic peace studies, formal deterrence modeling, and rationalist theories of war. It is hoped that the synthesis of these three bodies of literature will produce a model of democratic crisis behavior that is capable of generating new and interesting hypotheses about democracies and international crisis.

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The present thesis provides a definite answer to the question of how comparisons of certain aggregate quantities and price levels should be made across two or more geographic regions. It does so from the viewpoint of both economic theory and the “test” (or “axiomatic”) approach to index-number theory. Chapter 1 gives an overview of the problem of multilateral interspatial comparisons and introduces the rest of the thesis. Chapter 2 focuses on a particular domain of comparison involving consumer goods and services, countries and households in developing a theory of international comparisons in terms of the the (Kontis-type) cost-of-living index. To this end, two new classes of purchasing power parity measures are set out and the relationship between them is explored. The first is the many-household analogue of the (single-household) cost-of-living index and, as such, is rooted in the theory of group cost-of-living indexes. The second Consists of sets of (nominal) expenditure-share deflators, each corresponding to a system of (real) consumption shares for a group of countries. Using this framework, a rigorous exact index- number interpretation for Diewert’s “own-share” system of multilateral quantity indexes is provided. Chapter 3 develops a novel multilateral test approach to the problem at hand by generalizing Eichhorn and Voeller’s bilateral counterpart in a sensible manner. The equivalence of this approach to an extended version of Diewert’s multilateral test approach is exploited in an assessment of the relative merits of several alternative multilateral comparison formulae motivated outside the test-approach framework. Chapter 4 undertakes an empirical comparison of the formulae examined on theoretical grounds in Chapter 3 using an appropriate cross-sectional data set constructed by the Eurostat—OECD Purchasing Power Parity Programme. The principal aim of this comparison is to ascertain the magnitude of the effect of choosing one formula over another. In aid of this, a new indicator is proposed which facilitates the measurement of the difference between two sets of purchasing power parities, each computed using a different multilateral index-number formula. / Arts, Faculty of / Vancouver School of Economics / Graduate

This dissertation develops variants of the well-known Hotelling’s location model to examine the nature of competition in the audit market where audit firms make strategic specialization and pricing decisions. In a multi-period spatial oligopoly model of auditing competition, audit firms obtain market power through their service specialization with respect to client characteristics relevant to audit production. This market power allows audit firms to price discriminate among clients. Competition among audit firms is localized: an audit firm optimally charges a client, to whom it has the lowest auditing cost to serve, the marginal auditing cost of the second lowest-cost audit firm. These equilibrium audit firms’ pricing strategies result in an allocation of clients’ surplus and audit firms’ profits that lies in the core of the economy. The existence of a specialization-pricing equilibrium is also established. In equilibrium, given its rivals’ specializations, each audit firm’s profit is maximized by choosing a specialization that maximizes the social welfare (the sum of clients’ surplus and audit firms’ profits). Moreover, audit firms never choose the same specialization in equilibrium. Instead, in order to earn rents as ‘local monopolists’, audit firms differentiate themselves from each other. This result is consistent with a widely held notion that audit firms search for ‘niche’ markets, such as industry specialization, to increase their profits. The dissertation then focuses on a two-period spatial duopoly model in which the market power created by audit firm specialization is now further fortified by the presence of auditors’ learning and clients’ switching costs. In this case, audit firms optimally price discriminate among clients by offering them ‘specialization-and-relationship-specific’ audit fee schedules. The practice of ‘low-balling’ is found to be a natural consequence of the competition among audit firms. However, low-balling occurs only in a certain market segment where audit firms compete quite fiercely. The analysis also demonstrates how equilibrium audit fee schedules, audit firms’ specializations and profits, clients’ surplus, and social welfare depend on the auditing costs, the learning rate, and the switching costs. Some interesting policy implications are illustrated. Finally, the model is used to analyze the impact of banning audit firms from the practice of low-balling. It is demonstrated that even though a policy of banning low-balling always reduces competition, it improves social efficiency in some cases. / Business, Sauder School of / Accounting, Division of / Graduate

The object of current efforts at investigating catchment response is to derive a physically based stochastic model of the watershed. Recent studies have, however, indicated that a limiting factor in deriving such models is the dependence of hydrologic response on initial soil moisture. The dependence affects the distributions and moments of the hydrological processes being investigated. A stochastic model of soil moisture dynamics is developed in the form of a pair of stochastic differential equations (SDE's) of the Ito type. The sources of stochasticity are linked to the random inputs of rainfall and evapotranspiration (ET). One of the SDE's describes the "surplus" case, in which sufficient infiltration always occurs to allow for moisture depletion by the processes of drainage through and ET out of the root zone. The other SDE represents the "deficit" case, in which lack of adequate moisture leads only to an ET-controlled depletion process. Sample functions and moments of moisture evolution are obtained from the SDE's. From the general model of soil moisture, a specific model of initial soil moisture (the moisture at the beginning of a rainstorm event) is developed and its moments are derived. Furthermore, the probability distribution of initial moisture is postulated to permit the assessment of how initial moisture affects the estimation of hydrologic response. The moisture dynamics model reveals that the stochastic properties of moisture ae sensitive to initial conditions in the watershed only for less permeable soils under the "surplus" state but are practically insensitive to such conditions for more permeable soils. The stochastic properties are also less sensitive to initial conditions for all soil types whenever under the "deficit" state. These results suggest that hydrologic processes, such as precipitation excess and infiltration, depend on initial moisture only in regions where the soils are generally less permeable and where the climate tends to sustain a "wet" environment, whereas in arid or semi-arid regions, such processes would not depend on initial moisture. These conclusions imply that, in arid regions, an effective value of initial moisture such as the mean can be used to estimate the properties of the hydrologic processes, whereas in "wet" environments, more accurate values of the properties must be "weighted" based on the probability distribution of initial soil moisture.

Indiana University-Purdue University Indianapolis (IUPUI) / Background: Many authors have indicated that HIV-infected patients mortality risk is higher immediately following the start of Antiretroviral Therapy. However, mortality rate of HIV-infected patients is expected to decrease after starting Antiretroviral Therapy (ART) potentially complicating accurate statistical estimation of patient survival and, more generally, effective monitoring of the evolution of the worldwide epidemic. Method: In this thesis, we determine if mortality of HIV-patients increases or decreases after the initiation of ART therapy using flexible survival modelling techniques. To achieve this objective, this study uses semi-parametric statistical models for fitting and estimating survival time using different covariates. A combination of the Weibull distribution with splines is compared to the usual Weibull, exponential, and gamma distribution parametric models, and the Cox semi-parametric model. The objective of this study is to compare these models to find the best fitting model so that it can then be used to improve modeling of the survival time and explore the pattern of change in mortality rates for a cohort of HIV-infected patients recruited in a care and treatment program in Uganda. Results: The analysis shows that flexible survival Weibull models are better than usualoff-parametric and semi-parametric model fitting according to the AIC criterion. Conclusion: The mortality of HIV-patients is high right after the initiation of ART therapy and decreases rapidly subsequently.

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