Grocery, Inc. Essay

Grocery, Inc. is a retail grocery store chain based in Any State; U.S.A. Grocery has stores throughout the United States. Grocery has written contracts with many different vendors to purchase the products they sell in their stores. Vendors range from individuals to international corporations. Tom works as the produce manager for the store in My Town, U.S.A. Jeff, 17 years old, is spending his summer vacation working for Tom in the produce department. A.) Does Article 2 of the Uniform Commercial Code (UCC) apply to the contracts between Grocery and its vendors? Do common law contracts apply? Explain, in detail, why or why not. Your answer should compare and contrast common law contracts and UCC Article 2 contracts. Yes Article 2 of the UCC does apply to the contracts between Grocery and their vendors. Article 2 applies to all contracts for the sale of goods (2-102). The code contains a somewhat complicated definition of goods (2-105); the most important thing to understand is that the term goods means tangible personal property. Article 2 does not apply to contracts for the sale of real estate or stocks and bonds and other intangibles. The drafters of the code also tried to promote fair dealing and higher standards of behavior in the marketplace. They attempted to do this in several ways in Article 2. The Code imposes a duty on everyone making agreements under the Code to act in good faith (1-203). The Code also imposes certain standards of quality on sellers of goods as a matter of law. Common law contracts would also apply to the Grocery and their vendors, due to the mixture of goods and services. Common law would apply to the service element that is predominant in the contract with regards to the delivery of the goods. (Barnes, J). The difference between Article 2 and common law is that if the contract is for the sale of goods then Article 2 would apply, if it is not then the principles of common law under contracts would apply. Article 2 reflects an attitude about contracts that is fundamentally  different from that of the common law. The Code is more concerned with rewarding people’s legitimate expectations than with technical rules, so it is generally more flexible than traditional contract law. A court that applies the Code is more likely to find the parties had a contract than a court that applies contract law (2-204). In some cases, the Code gives less weight to technical requirements such as consideration than is the case in contract law. (Barnes, J). B.) Grocery contracted with Masterpiece Construction to renovate the store on Main Street in My Town. Masterpiece, unable to complete the renovation within the six month time limit due to a sudden increase in jobs, sub-contracted the entire job to build them to fall. Grocery was unaware of the sub-contract. When Grocery realized (due to poor quality of work) that Build, not Masterpiece, was handling the renovation, Grocery petitioned the court for an injunction and then sued Masterpiece for breech of contract and specific performance. Masterpiece argued that it had a right to delegate the duties of the contract, or in the alternative, to discharge the contract due to commercial impracticability. Who wins? Explain your answer. Based on the information provided by Grocery would win the case based on breech of contract and specific performance. Under breech of contract, promissory must perform their contractual duties in the manner they have promised to perform them. Since Masterpiece did not perform the duties in the manner in which they promised they are liable for breech of contract. The courts recognize that there are three basic degrees of performance: complete or satisfactory performance, substantial performance, and material breech of contract. (Barnes, J). A contract consists of both rights and duties. A contracting party has the duty to perform his or her own promise and the right to receive the other party’s promised performance. These rights and duties can usually be transferred to third persons. When rights under a contract are transferred, this is called assignment. The transfer of duties is called a delegation. Not all contracts are assignable  over the objection of the promissory. The promissory who delegates duties is still liable to the promise if the party to whom the duties were delegated fails to satisfactorily perform them. This would make Masterpiece liable for the quality of work that Build them to fall produced for Grocery. The only exception to this rule would have been if the parties had entered into a novation which is a new, separate agreement by the promisee to release the original promissory from liability in exchange for a third party’s agreement to assume the promisor’s duties. As for Masterpieces claim that they had a right to delegate the duties to Build them to Fall under commercial impracticability they would have to show that unforeseen conditions would have caused a delay or inability to make delivery of the goods (make performance impracticable), then they would have been able to claim commercial impracticability. In the absence of compelling circumstances, the courts do not readily excuse parties from their contractual obligations, particularly where it is clear that the parties anticipated a problem and sought to provide for it in the contract. Since Masterpiece had contracted to perform the work for Grocery and then had a sudden increase in jobs this would not be considered compelling circumstances for sub-contracting the job to a company that would perform a poor quality of work. C.) At the end of the summer, Jeff had earned enough money to put a down payment on a car. He decided to continue working part time during school to earn money for the car payments. Jeff purchased a car from Steve at the local used car lot. Steve did not ask Jeff how old he was; but assumed he had reached the age of majority. Jeff paid the down payment and signed the contract stating that he would make payments of $200 each month. Six months later Jeff lost his job and could no longer make the payments. Jeff took the car back to Steve and said he wanted to cancel the contract and that he wanted his money back. What are the possible outcomes? Explain your answers. Jeff was a minor at the time of the contract. Therefore, Jeff is considered not to have the capacity to enter into contracts. Steve made the deal in â€Å"good faith† that Jeff was old enough to enter into the contract.  Unfortunately, the contract is voidable. Jeff was correct that he could disaffirm the contract. And upon the disaffirmance, Jeff had to return the vehicle to Steve. Even though the right to disaffirm a contract was meant to protect minors, some states have rejected that idea because that view creates a hardship on the adult involved. Under the case of Dodson v. Shrader, 824 W.2d 545 Tenn. Sup. Ct. 1992), Steve would be allowed to recover the depreciation of the vehicle from the monies that Jeff has paid. Especially considering the fact that Jeff has had the vehicle for six months or more. The states defer on the idea that the minor needs to be reimburse the â€Å"innocent adult† for dealing with the minor. However, many times minors can pass as adults at approximately 14 years of age and up. Minors also get fake IDs to get things like buying beer. Therefore, by allowing the minor to get away with not paying the debt he or she willing entered or lied to the adult to sign a contract, is not in the best interest of society to allow the minor not to suffer the consequences. Therefore, holding the minor responsible for his or her actions is one way for the minor to learn responsibility. D.) Grocery has a written contract with Cereal, Inc. to purchase 20 cases of cereal per month at $22 per case. The contract does not state the types of cereal or how the 20 cases will be divided up between Grocery’s 20 stores in Any State. After a flood, Cereal suffers severe water damage in its warehouse. With the exception of Soggy Flakes, Cereal does not have enough undamaged cereal to comply with its Grocery contract. On the day delivery was due, Grocery receives 10 cases of Soggy Flakes at the three stores located in My Town and two stores in Your Town. Twelve days before delivery was due, Grocery had requested, by facsimile, that 15 cases containing a variety of cereals be delivered to the five stores listed above with the remaining five cases going to Grocery’s warehouse in Corp Town. Grocery wants to reject the shipments of Soggy Flakes and cancel its contract with Cereal. Discuss Grocery’s rights under contract law. Cereal argues that based on the gap-filling rule, it had the right to modify the terms of the  contract. Analyze the gap filling provisions of UCC Article 2 as they pertain to the terms of this contract. What rights and/or defenses, if any, does Cereal have under contract law? Analyze the remedies available to Grocery and/or Cereal. Explain all answers in detail. Grocery has the right to reject the shipment. Grocery has to notify Cereal that the shipment was not adequate and is being rejected pursuant to Article 2-602. The notice must be accomplished â€Å"within a reasonable time† and preferably in writing [Article 2-602]. Grocery has the right to reject the shipment and cancel the contract.. However, Cereal must notify Grocery that due to unforeseeable circumstances, the shipment will consist of Soggy Flakes and only ten cases of cereal will be delivered. Cereal must notify Grocery that Cereal intends to replace the shipment within a reasonable time (gap-filling rule). However, under the circumstances, Cereal may not know how long Cereal may be without the correct product. Furthermore, Cereal needs to decide what it wants Grocery to do with the product (whether to sell the product, destroy the product, or store the product for later pick-up). Grocery does not have to pay for return shipment. If Grocery feels that Cereal cannot meet the obligations incurred, Grocery can demand an assurance that the contract will be performed. If the assurance is not forthcoming within 30 days, then Grocery can repudiate the contract [Section 2-609]. If Grocery later decides the Cereal can meet the terms of the contract, Grocery can decide to continue wit the contract if Cereal can show that Cereal intends to meet the obligations of the contract. E.) Tom spent his time away from work on his hobby, model trains. His train set was very large and consisted of rare and one-of-a-kind trains. One day, while visiting with a fellow train hobbyist Harry, Tom said, â€Å"When I retire in two years from Grocery, I’m going to sell my trains and spend the rest of my years traveling on real trains.† Tom then told Harry that he was the only person he planned to offer his trains to because he knew Harry would take good care of them. Harry said he looked forward to the day when he could buy the trains. Harry then spent the next two years and most of his savings  building a new 2,000 sq. ft. room onto his house to make room for the trains. When Harry told Tom that he was building the new room, Tom just smiled. Tom also heard that Harry had borrowed money from his aunt to buy the trains. When Tom retired, he sold his trains to David. Harry sued Tom claiming breach of contract, or in the alternative, for promissory estoppels. Who wins? Explain your answer. Although Tom and Harry did not have a written contract about the purchase of the trains, they did have a verbal contract. Breach of contract is described as any failure to perform that is not excused (Mallor, Barnes, Bowers, Langvardt, 2004). When Tom told Harry that Tom would sell his trains to Harry, Harry had the reasonable expectation that Harry would receive the trains. Harry then spent a large amount of money building an addition to his house in order to have room for the trains. Harry also had borrowed the money to purchase the trains from his aunt. â€Å"Promissory estoppel is an equitable doctrine that protects those who foreseeably and reasonably rely on the promises of others by enforcing such promises when enforcement is necessary to avoid injustice, even though one or more of the elements normally required for an enforceable agreement is absent† (Mallor, et al, 2004, glossary). In this case an injustice to Harry did exist because of the money he spent in building onto his house and expectation he had of receiving the trains. Harry wins the case based on the recognition of promissory estoppels in section 90 in the first Restatement of Contracts in 1932 (Mallor, et al, 2004, 338). The court would see the injustice to Harry by Tom failing to fulfill his promise to sell his trains to Harry. F.) Jason shipped a truckload of peaches from his orchard to Grocery using an independent trucker. In route, the truck broke down and the shipment was delayed three days. The peaches were spoiled when they arrived. The terms of the contract were F.O.B. Who bears the risk? Explain your answer. F.O.B. (Free on Board) means the seller is responsible to deliver the goods  free of expense and at his own risk to the designated place of delivery. In this case Jacob was responsible for the shipment until it reached Grocery. Grocery would be able to file a suit against Jason for damages. Jason would, however, be able to file a suit against the independent trucker for the damages to the peaches. This case is similar to the case in the textbook Windows, Inc. v. Jordan Panel Systems Corp. In this case, however, the term FOB is not used. The windows were to be properly packed and shipped, but were damaged due to load shift during transport. The buyer, Jordan, expected to receive the windows in good condition, ready to install. When the windows were delivered in bad condition, Jordon filed against the trucking company and did not pay Windows for the order. Jordan then ordered a duplicate order to be shipped that Jordan received with no problem. The error in this case was that Jordan did not pay Windows for either order and Windows had to file suit against Jordan in order to be paid for the shipments. Judgment was affirmed in favor of Windows. G.) Discuss the different warranties that apply to Grocery’s business. Explain your answer in detail. Grocery’s business operates under the implied warranty of merchantability. This warranty is one that the legal community has created, not one that is operating under a written or accepted contract. The warranty operates under UCC section 2-314(l) . Section UCC 20314(l) reads: â€Å"[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. (Mallor, Barnes, Bowers and Langvardt, 2007). Under this warranty, Grocery’s implied warranty is that the products sold will be useable for the purpose intended. Grocery would be held responsible for products like canned goods, meats, bakery items, and the like because Grocery is in the business of selling these goods. Section 2-314 states the products must meet the following criteria. (1)In the trade, the product must pass inspection without objection. (2)The product must be fit for the purpose for which the product wasintended;(3)The product must be of even kind, quantity (same size unit), and kind (like boxed cereal). (4)The product must be adequately packaged and labeled (must list things like the calories per serving). (5)The product must conform to the packaging and labeling regarding any promises or statements that may be stated (the cereal must be Rice Krispies and not Cheerios if the box is marked Rice Krispies). (6)If a product is perishable, the product must be of fair quality. If goods do not conform to the above standards, a consumer may pursue legal remedies. Goods that do not function as intended are not merchandisable and would not meet the above standards. Furthermore, Grocery would be responsible for the goods sold at the store, not for computer products since the normal business of Grocery would be for canned goods, bakery items, meats, and the like. H.) Supplier Inc., a large wholesaler, had a contract with Grocery. Supplier sued Grocery for breach of contract when Grocery failed to place an order for goods by a specific date as specified in the contract. Each order was worth at least $550. Grocery contended that the contract Bill Green signed was a standard preprinted supply contract without specifics regarding time of order and quantity. Green had authority to sign a standard supply contract, but could not authorize specific terms. This was unknown to Supplier. Supplier argued that terms were â€Å"boilerplate† and therefore could be modified by acceptance. Supplier offered oral testimony at trial to prove that Green agreed to the modifications. Is there a contract? If so, what are the terms? Explain your answer. 1. Yes, there is a contract. The contract that Green claims to be a standard  preprinted supply contract and Suppliers claim can be modified by acceptance. 2. The terms are that Grocery was supposed to purchase goods by a specific date. 3. Each order is worth at least $550. a.) Also, discuss the use of Suppliers oral testimony at trial. 1. The use of Suppliers oral testimony can go either way. Oral testimony can be very effective if Supplier can prove that what Supplier is saying is true. Oral testimony can also be detrimental to Supplier’s case if it is proven that Supplier is lying. 2. Presenting to the courts and the jury that the copy of the actual contract is always a good idea. It will be up to the courts to decide if the original contract stands or if it is void. References Edition e-text] Prentice-Hall Publishing. Retrieved August 25, 2005, from University of Phoenix, Resource BUS/415-Business Law Web Site:https://ecampus.phoenix.edu/content/eBookLibrary/content/eReader. Mallor, J.P., Barnes, A.J., Bowers, T., & Langvardt, A.W. (2007). Business law: The ethical, global and e-commerce environment, 13e. The McGraw-Hill CompaniesUniversity of Phoenix. (Ed) (2005). Business Law [University of Phoenix Custom]

Case enron Essay

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The Importance of Market Segmentation Essay Example | Topics and Well Written Essays - 1500 words

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Disaster Recovery Plan for Home Assignment Example | Topics and Well Written Essays - 250 words

Disaster Recovery Plan for Home - Assignment Example The laptop is used for school assignments, emails, contains e-books and an electronic address book (Rittinghouse & James 12). Each of these assets will need a recovery window. This simply means how long one can do without the access to the resource. For example, the parents can do without email for about 6 hours. For the laptop, if one is in school, then the recovery window for the assignments and school assignments may be less than when on vacation. The next step is to define the recovery solution. Here, the major question is, how will each use of the asset be recovered? As we are dealing with data, there will be need for a disk back up for all the information on the desktop and the laptop. Dat replication can also be used where this is done at an offsite. Each asset based on its value, should have a recovery window and the appropriate recovery solution. For example, the emails on the desktop are through Miscrosoft Outlook. Microsoft offers its exchange hosted continuity as backup. The draft plan needs to be put down on paper, defining the assets and how they will be protected. The plan needs to be commun icated to all those who use the assets. The users will be aware of how to asses and use the various applications in case of disaster. The plan needs to be tested and refined, and retested to ensure that it can be implemented in case of a disaster (Rittinghouse & James

Set out the main ways in which continental European employees' working Essay

Set out the main ways in which continental European employees' working conditions are said to be better than for those working - Essay Example This model came into existence after the World War II. These countries opened their economies by abandoning protectionist policies. This social model was also possible because of the availability of cheap energy to drive their industries. European states usually do not have a single social model that applies to all of them. However, welfare states have some similar broad characteristics. These characteristics include the commitment to a social protection scheme, democracy, social inclusion, and full employment (Vanhuysse, 2012). The European community treaty establishes several objectives that these states have to meet. These objectives includes promoting employment opportunities, improving the working and living conditions, establishment of trade unions, better management and labor policies, encouraging investments, developing human resources, and tackling the problem of unemployment. The focus of this model varies amongst the various European states. This is because each state puts some focus on a different aspect of this social model, and the European treaty. Due to the differences in the implementation of this social model, it has been argued that there are four main social models in Europe (Munck, 2012). They are the Anglo-American model, the Nordic, the Continental and the Mediterranean model. This paper concerns itself mainly with the Anglo-American and the Continental European economic models, and how these models treat employees working in their industries. These social models encouraged industrialization; hence there was the need of workers to drive the growth of these industries. Up to date, business organizations, irrespective of their sizes are responsible for employing a large percentage of workers in Continental Europe, and the Anglo-American economy. These firms account for wealth creation in Europe, and they determine the political organizations which are responsible for regulating the society and the economy. The areas of regulation are on the status of European employees, and their welfares or interest (Burroni, 2012). It is important to denote that the continental European social model is different from the Anglo-American social model. The manners in which these two models treat their employees are very different. This paper seeks to analyze the Anglo American social model, and how it treats its employees. This paper also analyzes the Continental European social model, and how it treats their employees. After these analyses, this paper identifies their differences and similarities. This paper takes a stand that the working condition of the Continental European employees is far much better, than the working conditions of the Anglo-American employees. This paper explains how Continental Europe managed to improve the working conditions of its employees. In explaining these points, this paper focuses on Denmark, Germany, and Netherlands. The countries that ascribe to the Anglo America model are Ireland and the United Kingd om. According to this model, the state plays a minimal role in regulating the performance of its market. That means the elimination of various barriers to trade such as taxes. It also means that the state does not interfere with the pricing system of companies. This is because the level of competition within an economy will most definitely determine the prices of products sold in the economy. This model is also characterized by very high competition amongst companies. This is

Sexual Harassment Paper Research Example | Topics and Well Written Essays - 1750 words

Sexual Harassment - Research Paper Example It commonly takes a pattern of behavior, but it can also take the form of a single incidence to direct towards a group of persons or an individual. It is noteworthy that all employees; whether supervisors, peers, or subordinates should treat one another with respect, tolerance, sensitivity, and impartiality. They should avoid any behavior that may create a hostile environment or intimidation at the work place. However, this is not the case in most of the workplaces as observed. Many types of behaviors fall under the same umbrella of sexual harassment. There are effective ways as outlined in the law to deal with sexual harassment. People consider sexual harassment as a â€Å"natural† practice based on pure sexual attraction (Petrocelli, and Barbara Kate, 3). A common say goes, â€Å"Boys will be boys†. They will always be attracted to women at all costs or any circumstance. Sexual harassment may result from the victim’s provocative dressing behavior, people statin g, â€Å"she was asking for it† (Resnik 660). That statement is what most of the culprits say. They also believe that sexual harassment is justified because women are working in jobs traditionally held by men i.e. â€Å"it is men’s work; women should not be there.† The tradition that women should not have power still operates for some persons. In that, they believe that women should primarily be homemakers.In most cases, what follows is that there are no consequences for the harasser, no incentives to report sexual harassment (Baillien, Inge, and Hans 5). The victim receives blame while, in other cases, it is said that a work environment is permissive of sexual harassment. Sexual harassment is also about economic motivations. Men have used it in maintaining their competitiveness in the workplace. Their aim in doing this is to preserve their most rewarding jobs as they brand women in such positions as incompetent and unsuitable for such positions.Sexual harassmen t is a dignity insult in the workplace. Some theories characterize sexual harassment as a violation of dignity. They aim at prohibiting harassing behavior towards all workers regardless of gender (Heather, Vanessa, and Deborah 4). In fact, some Western European countries address such issues as â€Å"moral harassment,†, â€Å"workplace bullying† or â€Å"mobbing† thus; they focus less on the issue as a gender dynamic and more on the question of rights for all workers. Sexual harassment refers to any interaction be it verbal, or physical, that causes displeasure. This interaction could be verbal abuse, jokes, or conversations about sex or sexual suggestions or explicit language about sex that offends another person. Pressure for sex e.g. one could be flirting, asking for sex, staring or brushing up against a person’s body, is an offensive behavior. It includes any physical contact that a person does not want like patting, pinching, hugging kissing or any un needed touching (Baker 23). Showing any sexually explicit or degrading materials like posters, calendars, graffiti, or clothing with an offensive message is another conduct considered sexual harassment (Barickman, Barickman, and Paludi 133). Short message services (SMS) in mobile phones and emails or other communication tools that display offensive language is sexual harassment. A work-related event that is sexually oriented is a serious offence considered harassment. In some cases, an employer or fellow

Fieldler's Contingency Theory Research Paper Example | Topics and Well Written Essays - 750 words

Fieldler's Contingency Theory - Research Paper Example This scale measures the leadership style of an individual by taking into consideration the opinion of the persons that have been able to work the least well with the subject. The theory might seem a bit odd since one would think that the opinion of the person that you had trouble with would not be such an important factor. The theory can be used to differentiate between relationship motivated styles and task motivated leaders. There are three situational control variables that must be considered. The three situational control variables are leader-member relations, task structure, and position power. The Fieldler contingency theory can be used in the workplace to improve the performance of the workers by using the best leadership style based on the circumstances. Take for example a project manager leading a group of workers. The workers the project manager was given were a group of recently recruited employees. They lack a lot of experience at the work tasks and have little knowledge of the corporate culture of the firm. Based on this scenario it would be more effective for the project manager to use a task orientated leadership style. The project manager should pay close attention to each member of the crew to make sure that the workers understand what is expected of them. The project manager should establish good communications and relations with the workers to build a bond of trust. In the future once I reach a position where I have to exert leadership to manage a group of people I plan on using Fielder’s contingency theory to my advantage. If I was faced with leading a group of workers that had lots of experience, good interpersonal relations among themselves and with the boss, understanding of the culture of the firm and clear knowledge of what is expected of them I would use a relationship-motivated leadership style. A company that has utilized Fielder contingency theory to improve the performance of its workers is Sears Roebuck. Contingency theory has tremendous utility because it can be applied in a wide variety of industries. The theory allows the leader to adapt to the circumstances. The academic community has used Fieldler’s contingency theory in research studies to test different aspects of leadership. A study performed on 360 senior managers across 20 different British firms concluded that leadership and decision making must be analyzed form a contingency rather than a universalistic perspective (Heller, 1973). Fieldler’s work has evolved and recently the theory has evolved through the development of cognitive resource theory. The new cognitive approach states that that leader should use directive or nondirective behavior based on situational contingencies such as experience, support of the leader, and stress. For example when leaders have to manage a group of employees working on tight deadlines such as an accounting staff during the closing period the leader should not exert excessive pressure on the sta ff since the worker already realizes the deadlines they have to meet. Being a facilitator during these circumstances is a more effective leadership style. Contingency theories such as Fieldler’s direct their research towards discovering the variables that make certain leadership characteristics and behaviors effective in specific situations (Gunbayi, 2005). Contingency theory can be very effective in fast adaptive environments such as a casino operation. The casino

The Catholic Faith With Contrasting Facts on Islam Religion Essay

The Catholic Faith With Contrasting Facts on Islam Religion - Essay Example With the death of Christ, the apostle Peter was designated as the first Pope, or temporal head of the Catholic Church. Since then, the mission of this faith is to spread the faith across the world. According to Pope Benedict XVI, the mission of the Catholic Church can be summarized â€Å"as a threefold responsibility to proclaim the word of God, celebrate the sacraments, and exercise the ministry of charity† (Benedict XVI 2005). Known to be one of the oldest institutions in the world, the Catholic Church is rich with traditions and beliefs seen through the eyes of devotees. This essay provides the opportunity for a Catholic devotee to be interviewed. In the process, one would appreciate the insights, beliefs, underlying teachings of the Catholic Church as seen from of an ordinary woman. The interview was conducted in the Infant of Prague Catholic Church at Jacksonville, North Carolina. The person being interviewed is Christina Cordero, a Roman Catholic by virtue of her birth and baptism. She was raised in another country, the Philippines, which is a predominantly Catholic country. The Infant of Prague Catholic Church is medium built. It has three balconies, vaulted ceilings, a separate room for families with small children who might act up during service, an elaborate altar flanked by praying candles, and beautiful stained glass windows with depictions of St. Michael, St. Peter and others saints. Apart from the solemn faà §ade, there is just one thing that needs some maintenance and repairs – the pews.

Problems in Economic Development 's assignment Example | Topics and Well Written Essays - 750 words

Problems in Economic Development 's - Assignment Example However, extensive stage of growth is where by growth in the economy is caused by intensive factors such as improved technology that help to increase production. As a result, economic growth is achieved. Developed countries experience this type of growth as they try to enhance production through improving technology. 3. a) Reversal of fortunes refers to the reversal of income distribution from the 1500 to the present. The richest civilizations in 1500 were the Aztec and the Incas. While the lowest civilizations were in North America, New Zealand and Australia, which were less, developed. However in present day, the US, Canada and New Zealand are richer than countries occupying territories of Mughal, Aztec and Incas. Therefore shows the reversal of fortune. b) The Simple Geography Hypothesis states that the time invariant effects of geographic variables, like climate and disease, on work effort, productivity, and output. However, this is contrary to the reversal of fortune, as countries that were prosperous in 1500 should still be prosperous today, as geographical features do not change. c) Europeans established these two institutions in their colonies. One was the extractive institutions, which concentrate power in the hands of small groups of elites and produce a high threat of expropriation for the mainstream population. The other was the institution of private property that are important for economic performance. They were established in the Aztec and the Incas empires. 4. a) Microfinance Institutions characteristics include: They offer small loans to start businesses. They also offer loans at lower rates than other financial institutions. Finally, the repayment dates are fixed and no negotiations are made unlike for other moneylenders. b) Microfinance Institutions have been successful to some point as people have started businesses and purchased larger durable goods that they would not have bought without such

Personal Development Plan Part 2 Essay Example | Topics and Well Written Essays - 2000 words

Personal Development Plan Part 2 - Essay Example the same time, though, I realize that such output, while good, was not my best, and that I could have done better had I exercised proper time management instead of procrastinating. It is for this reason that I chose to work on my weaknesses as the focus of my personal development – in this case in particular, fixing my weaknesses will allow me to utilize my strengths to greater effect. Time management – a concept our parents and teachers have been beating us over the head with ever since elementary. Those of us fortunate (and diligent) enough to gain a good grasp of it early on usually end up becoming successful enough, while those who fail at it often end up failing at everything else. This is not too noticeable in elementary and high school, where students have their daily schedules predetermined – they know what time each subject is, which saves them the trouble of having to fix their schedule. In college, however, time management and/or the lack of it becomes more readily apparent. According to Penn State’s University Learning Center (2001), the greater freedom of movement in college means it falls down to the students themselves to manage their time as they please. Before discussing my time management issues, though, I feel it to be more important to first define what exactly time management is. According to Steve Pavlina (2008), time management boils down to deciding what one must do and then doing it. And while these steps may look simple enough to understand at first, another question immediately follows: what exactly should one do at a given moment? Opportunity costs also come into play as no matter what course of action one chooses, it will always involve forgoing the results that could have been gotten from the other options. Thus, as in business, it becomes necessary to choose the path with minimum cost, yet maximum satisfaction. In short, time management should focus on scheduling the best task for a given period of time. All other side

Risk management at wellfleet bank Essay Example for Free

Risk management at wellfleet bank Essay The 2007-2010 ï ¬ nancial crisis has brought credit risk and default to the forefront of the regulatory and political discussion. This case illustrates risk management in the world of corporate lending which is quite diï ¬â‚¬erent from the retail, subprime, and mortgage lending at the root of the recent banking turmoil. It is also interesting because Wellï ¬â€šeet (actually, Standard Chartered PLC; ticker symbol: STAN) is one of the few banks which successfully weathered the 2007-2009 credit crisis. Chief executive Alastair Dowes has to decide if the risk governance process is adequate to uncover mega-risks in light of the current risk-assessment process and the credit decision regarding a bn loan application. Working for the Chief Credit Oï ¬Æ'cer (CCO) as a senior loan supervisor, you have been asked to assess and review the risks in the proposal and to make a credit recommendation, i.e., whether Wellï ¬â€šeet should accept the loan application or not. At the same time, you are worried about gray-area risk decisions and, in particular, the fact that risk-adjusted performance measurement can rarely be automated. Risk governance requires executives to strike a balance between risk modeling and qualitative business judgment—a holistic (rather than silo-based) view of risks. You are preparing either an executive memo to the CCO and CEO or a presentation to WellFleet’s credit committee. The following questions are meant to guide your analysis: 1. How much credit risk should banks take? What avenues do they have to manage credit risk ex ante and ex post? 2. Research the history of WellFleet = Standard Chartered. How well has Wellï ¬â€šeet performed? Why and how has it avoided major problems in its corporate loan portfolio? Was the bank lucky or smart? 3. Analyze the risk management process at WellFleet Bank. What suggestions might you make to the CEO about improving the process? (a) What are the objectives of loan oï ¬Æ'cers and supervisors, respectively? What about the risk management unit? (b) Are the incentives of line and risk management units aligned? Why or why not? (c) How would you organize origination and risk management activities? 4. What risk factors drive the credit exposure to Gatwick? Analyze what a credit bet on Gatwick really amounts to. (a) Download stock prices for pure gold-mining companies such as Barrick (ticker: ABX) and Newmont (ticker: NEM) as well as a gold prices and the SP 500. Calculate the instantaneous return Rit = ln PPit . it−1 (b) Compute the correlation matrix for the 4 variables. How would you interpret the results? (c) Run a CAPM-type regression of the gold-miner’s return Rit on a constant, the SP 500 return Rmt the gold return Gt by OLS, i.e., estimate the following model: Rit = ÃŽ ± + ÃŽ ²Rmt + ÃŽ ³Gt + ÃŽ µt How would you interpret the results? What does it tell you about the credit exposure? 5. Calculate the Expected Loss, Economic Revenue and Economic Proï ¬ t for both proposals. What would your decision regarding the two credit proposals be? Why? (a) What steps if any could Wellï ¬â€šeet take to reduce its credit exposure to Gatwick? (b) What avenues are open to the bank to manage its credit exposure ex ante (before and in the lending process) and ex post (after the loan went onto its books)? 6. Given Wellï ¬â€šeet’s new focus on large corporate deals and its need to recruit relationship managers from investment banks, what are the challenges for the risk culture of the organization, and its style of risk management in particular?

Inborn errors of metabolism

Inborn errors of metabolism 1.0 Abstract Inborn errors of metabolism occurs 1 in 5000 births collectively. They can be treated if the inborn error is diagnosed properly and early. They are manly caused by a gene defect that blocks vital metabolic pathways. The can be server, which is mainly due to amount of enzymes that is causing the block or deficiency of the reaction product. This can affect the organs and also have local effect such as lysosomal storage disease. The symptoms can vary, from mild to severe. They affect any organs and occur at any time. To recognise the Inborn Errors of Metabolism, the doctor must be suspicious; for example a baby that show signs of antecedent maternal fever should undergo a blood culture and also undergo simple tests such as Amino acids, Organic acids, Glucose, Electrolytes, Lactate, and Ammonia; which is done in the laboratory. 2.0 Abstract Inborn errors of metabolism (IEM) are a group of genetic disorders that are rare. These disorders are genetic diseases that are involved in metabolism disorders. A large section of these disorders arise from single genes that encodes for enzymes; that have been defective. These enzymes are important that they catalyses chemical reactions converting substrates to products essential for everyday living. Inborn errors of metabolism disorders can arise from a number of conditions such as prolong exposure and accumulation of substances which are toxic, and the interference of normal functions and the inability to produce and synthesize essential compounds. Inborn errors of metabolism has related to defects in or damage to a developing foetus that may have been caused to genetic changes, that is why Inborn errors of metabolism is sometimes referred as congenital metabolic diseases. Inborn errors of metabolism have also been linked to heritable disorders within biochemistry, for example phe nylketonuria (PKU). That is why some times it is referred as inherited metabolic diseases as well. In the perspective of changes of normal mechanical, physical, and biochemical functions, IEM can divided into three useful groups that can be analysed diagnostically. Group 1: Disorders which causes intoxication. Group 2: Disorders involving energy metabolism. And Group 3: Disorders involving complex molecules. 1.0 Introduction 1.1 Inborn Errors of Metabolism In the early 1900s, a researcher called Sir Archibald Garrods based his studies on genetic metabolic disorders and discovered IEM [1, 2]. He was known for his work on the one gene, one enzyme hypothesis, based on his studies on the nature and inheritance of alkaptonuria. And gave the name and wrote a book on IEM (The Incidence of Alkaptonuria: a Study in Chemical Individuality.) [1, 2]. IEM can arise from a number of causes, but the major cause is alteration of a specific metabolic reaction [1, 2]. IEM has been shown to develop at a very young age, where epidemiology findings indicated that hundreds of IEM affects about 1 in every 5000 born babies [2]. But as technology advances and improved techniques such as metabolomics, has been easy to develop newborn screening that improves early diagnosis and treatment in a number of IEM disorders [2]. But as these new techniques cost a lot to run and time increases, proving to be unreliable [2]. The study and the knowledge about inborn errors of metabolism (IEM) have improved due to the latest advancement in technology and techniques [2, 3]. These improvement have led us to the conclusion, for example urea cycle disorders and organic acidemias may and will lead to the accumulation of ammonia, which is a toxic product of amino acid metabolism [2, 3]. Also the latest findings are that inborn errors of metabolism (IEM) may impair brain function due to defects in the mitochondrial respiratory chain and disorders in gluconeogenesis [4]. There are 10 facts that need to take inconsideration when people with IEM undergo clinical diagnosis [5]. Common condition such as, intoxication, encephalitis and brain tumours in older patients and also sepsis have to be analysed properly and always consider IEM in the same field [5]. Symptom that persists and that are unexplained even before, during and after initial treatment and usual investigations has been performed, have to be taken to consideration that it could be IEM [5]. Newborn babies that have organ dysfunction, hypo-perfusion, or hypotension can develop sepsis, which can be caused by IEM. So any babies in neonatal intensive care unit that die, the first cause that has to be taken to account is IEM [5]. Have to take extra care in reviewing all autopsy findings [5]. The examiner must not confuse a symptom for example peripheral neuropathy; or syndrome such as sudden infant death with etiology [5]. IEM can develop and present at any age, for example from foetal life to old age [5]. The examiner must take to account that not all genetic metabolic errors causes are due to hereditary and transmitted recessive disorders, but a large section of individual cases are sporadic [5]. Always consider inborn errors of metabolism are open to treatment for example with patients that have inborn errors of metabolism due to intoxication [5]. In server situations, the examiner will need to take a few patients with IEM that are able to diagnose and treat the patient with IEM [5]. The examiner must be open to obtain help from specialised centres that specialise with IEM [5]. The metabolic disorders can be set into three useful groups that can easily be distinguished from each other [5, 6, 7]. These three groups are sorted from a pathophysiological point of view [5, 6, 7]. The groups are; Group 1: Disorders which is caused by intoxication [5, 6, 7]. Group 2: Disorders involving energy metabolism [5, 6, 7]. And Group 3: Disorders involving complex molecules [5, 6, 7]. 1.2 Group 1- Disorders which is caused by intoxication In this group, it describes inborn errors of intermediary metabolism. These inborn errors cause acute of progressive intoxication from long exposure and increase of toxic compounds, forming a metabolic block [5, 6, 7]. In group 1 the inborn errors are manly amino acid catabolism [5, 6, 7]. These include phenylketonuria, where there is a deficiency in the enzyme phenylalanine hydroxylase (PAH); which is needed to metabolise the amino acid phenylalanine to the amino acid tyrosine [5, 6, 7]. Homocystinuria is an inherited disorder of the metabolism of methionine [5, 6, 7]. Tyrosinemia is where body cannot break down the amino acid tyrosine [5, 6, 7]. Also organic acidurias such as methylmalonic acidemia, and propionic acidemia [5, 6, 7]. Sugar intolerances are also classified in group 1 [5, 6, 7]. These include hereditary fructose intolerance caused by a deficiency of liver enzymes that metabolise fructose. Metal toxication also falls under group 1; such as hemochromatosis, where the patient has accumulated a lot of iron [5, 6, 7]. All these metabolic disorders have something in common, in that they do not affect the embryo development, and also show similar symptoms of clinical intoxication [5, 6, 7]. A patient with group 1 disorders may show an acute signs of vomiting, coma and liver failure; or chronic signs which are cardiomyopathy, developmental delay and failure to thrive. Acute symptoms that can worsen are catabolism, fever, and food intake [5, 6, 7]. The analysis in group 1 is easy, and without any complications [5, 6, 7]. It needs the use of chromatography in which the plasma and urine amino acid. Most of group 1 disorders are treatable. Treatment is usually involves special diets and cleansing drugs such as sodium benzoate and penicillamine, to remove the toxins [5, 6, 7]. The inborn error of amino acid synthesis is also included to this group, as they have the same or similar features [7, 8]. They are inborn errors of intermediary metabolism; the analysis requires the plasma and urine where disorders are able to be treated even when the disorder starts with in the uterus, for example 3-phosphoglycerate dehydrogenase deficiency [5, 6, 7, 8]. 1.3 Group 2- Disorders involving energy metabolism In this group inborn errors are errors of intermediary metabolism as well. The symptoms are mainly caused by a lack of energy production or utilization. This will involve the liver, myocardium, muscle, and brain [5, 6, 7]. There are two types of disorders involving energy metabolism. 1. involves mitochondrial energy defects. 2. involves cytoplasmic energy defects [5, 6, 7]. Mitochondrial energy defects are more aggressive and are not fully treatable [5, 6, 7]. Mitochondrial energy defects cause lactic acidemias where there is dextrorotatory lactic acid in the circulating blood, resulting to defects of the pyruvate transporter resulting to PKU, pyruvate carboxylase this causes lactic acid to accumulate in the blood, pyruvate dehydrogenase where the patient can show symptoms of severe lethargy, and defects in the Krebs cycle [5, 6, 7]. But some defects such as fatty acid oxidation and ketone body defects are partly treatable [5, 6, 7]. Cytoplasmic energy defects are not as much aggressive then mitochondrial energy defects. A cytoplasmic energy defect causes disorders of glycolysis, glycogen metabolism and gluconeogenesis [5, 6, 7]. And recent study showed it causes disorders of creatine metabolism which it is partly treatable by oral creatine supplementation [5, 6, 7]. Cytoplasmic energy defects can cause disorders that are untreatable, such as errors of the pentose phosphate pathway which will be described in further details [5, 6, 7]. In group 2, the common symptoms are heart muscle disease, hypoglycaemia, myopathy which is a muscular disease, cardiac failure, specific failure of the circulation, sudden death especially in infancy [5, 6, 7]. Mitochondrial disorders and as well as the pentose phosphate pathway defects can obstruct embryo-foetal development and give rise to dysmorphism, dysplasia causing an abnormality in maturation of cells within a tissue and congenital disorder [5, 6, 7, 9]. The analysis and the diagnosis are hard to put through as it requires 4 different tests [5, 6, 7]. 1. Function tests [5, 6, 7]. 2. Enzymatic analyses needing biopsies [5, 6, 7]. 3. Cell culture [5, 6, 7]. 4. Molecular analyses [5, 6, 7]. 1.4 Group 3- Disorders involving complex molecules. Group 3 involves cellular organelles [5, 6, 7]. The diseases that fall under group 3 modify the synthesis or the catabolism of complex molecules [5, 6, 7]. There are symptoms that are permanent and progressive, and some symptoms free from intercurrent events [5, 6, 7]. In this group there are disorders such as lysosomal storage disorders, peroxisomal disorders and inborn errors of cholesterol synthesis etc. In this group treatment is difficult would need enzyme replacement therapy, especially for lysosomal disorders [5, 6, 7, 10]. 2.0 General Symptoms and Signs There is a way for testing newborn babies for inborn errors [11]. This process is called Newborn screening. This tests babies at a very early age for four types of diseases that are treatable: genetic, endocrinologic, metabolic and hematologic diseases [11]. Dr Robert Guthrie was a microbiologist who designed a dried blood spot testing, and used it to screen for phenylketonuria [12]. To this present day that spotting test is still being used. As techniques have improved so have the screening [12]. A physician who is screening a newborn baby for a metabolic disorder has follow four groups of clinical circumstances: The physician must find early symptoms, especially in the antenatal and neonatal period of development. In the later stages the physician must find symptoms that are server and recurring. Symptoms such as coma and vomiting. If the physician finds any symptoms that are chronic and aggressive, they could be due to three things: 1) Gastrointestinal. 2) Muscular. 3) Neurological. These will be described in more detail below The physician must find any signs of cardiomyopathy, hepatomegaly etc. This could lead to organ failures. The three groups have symptoms that are chronic and aggressive that can be easily ignored or misinterpreted. 2.1 Gastrointestinal Symptoms. If a patient has inborn errors of metabolism (IEM), the person might have symptoms that fall under the Gastrointestinal Symptoms (GI) group [13]. These symptoms include Anorexia, which is an eating disorder [5, 13]. Osteoporosis which untreated could lead to bones fracturing. Chronic vomiting, feeding difficulties, and failure to thrive are also symptoms of (GI). But they are also associated with chronic diarrhoea [5, 13]. This could lead to false and the wrong diagnosis [5, 13]. There are two groups that have been described to have caused chronic diarrhoea and failure to thrive within inborn errors of metabolism: These disorders include errors of the intestinal mucosa or the exocrine function of the pancreas, for example congenital chloride diarrhoea, glucose- galactose malabsorption a condition in which the cells lining the intestine cannot take in the sugars. Lactase and sucrose-isomaltase deficiencies where the person is unable to metabolise lactose or sucrose. Abetalipoproteinemia type II disorder that interferes with the normal absorption of fat and fat-soluble vitamins from food [5, 13]. Enterokinase deficiency; Enterokinase is an enzyme involved in human digestion. Acrodermatitis enteropathica, a condition that affects that absorption of Zinc. Etc [5, 13]. Systemic disorders such as diabetes mellitus, diabetes, sickle cell disease, sarcoidosis, etc can also give rise to GI abnormalities. A problem has risen in distinguishing systemic abnormalities and inborn error of metabolism and vice versa [5, 13]. 2.2 Muscle Symptoms. There are a number of symptoms that fall under this group. For example: Hypotonia, where there is a disorder that causes low muscle tone and strength [5, 14]. Muscular weakness and poor muscle mass [5, 14]. These symptoms are common with many inborn errors of metabolism. These symptoms can be caused by urea cycle defects and many amino acid metabolism disorders [5, 14]. Recent studies have shown that the cause of muscle symptoms can be due to mutations in the monocarboxylate transporter 8 gene, which can develop Allan-Herndon-Dudley syndrome [14]. Allan-Herndon-Dudley syndrome falls under the muscle symptoms group as it causes hypotonia, general weakness of the muscle, reduced muscle mass and delayed development [14]. Further studies showed that this X-linked mental retardation syndrome is involved in the transport of triiodothyronine into neurones and disrupts the blood levels of thyroid hormone [14]. 2.3 Neurological Symptoms. Patients with inborn errors often have neurological symptoms. These include of neurological abnormalities, in the central and peripheral system. Studies have shown that these neurological symptoms are very frequent with inborn errors [5, 15]. These symptoms include poor feeding, hypotonia, ataxia, and even autistic features [5, 15]. The analysis of inborn errors, due to the screening of neurological symptoms is very difficult due to symptoms that are non specific signs; sings that include for example developmental delay, and hypotonia [15]. 3.0 Screening Newborns for Inborn Error of Metabolism 3.1 Newborn screening Newborn screening is a technique, used to detect inborn errors [17, 12]. It was first used to detect phenylketonuria (PKU) by a bacterial inhibition assay, developed in the 1961 by Dr Robert Guthrie as already stated. His technique in using dried blood sample was further developed in the mid 1975, where a scientist called Dussault used a method to screening for congenital hypothyroidism [16]. A lot of time and money has been invested into the screening programme, and now they have uncovered new disorders that are related to inborn errors [17, 12]. Disorders such as cystic fibrosis, congenital adrenal hyperplasia, which is a form mutation of genes that produces enzymes that mediating production of cortisol from cholesterol by the adrenal glands. Glucose-6-phosphate dehydrogenase deficiency and many more [5]. To this present day, for screening newborns, tandem mass spectrometry is used [18]. It is a lot easier for screening and diagnosis. The application of tandem mass spectrometry to newborn screening was first described in 1990 [18]. The primary aim of newborn screening is to identify patients, manly infants with serious disorders that are treatable [18]. This will make it easy to prevent or improve clinical symptoms of the disease [18]. Tandem mass-spectrometry is very useful in detecting more than one disorder at one time [18]. This can be used to detect early untreatable disorders and also can be beneficial if the screening was not limited to just individual babies, but the whole family as well [18]. The screening process uses MSMS [18]. MSMS is the method used to measure analytes by both mass and structure [18]. First the compounds are ionised, where the first mass spectrometer selects the ion of interest, where it is sorted by weight [18]. Then the compounds travel through a collision cell, are dissociated to signature fragments, and then pass into a second mass spectrometer where ions are selected for detection. [18]. 3.2 Method for screening Research have been done where most newborn screening programmes use simplifying sample preparation, instead derivatisation of the sample which is the old method [18]. When investigating, the sample might show more than one disorder. But the use of ratio of analytes improves sensitivity and specificity [19]. Specialised biochemical genetic testing is always done to verify which type of disorder the patient has [18]. Theses genetic tests include amino acid analysis, organic acid analysis by gas chromatography/mass spectrometry, and plasma acylcarnitine profile by MSMS [18]. 4.0 Screening for Individual Inborn Errors of Metabolism Well over 40 inborn errors of metabolism can now be detected by newborn screening [20]. This section will look at three inborn errors. 4.1 Pentose Phosphate Pathway The pentose phosphate pathway (PPP) is an anabolic pathway where is uses a 6 carbon glucose to generate a 5 carbon sugars and reducing equivalents, as shown in Fig. 1. There are three primary functions of this pathway [21]: To generate reducing equivalents, such as NADP forming NADPH. NADPH allows reduction biosynthesis reactions to occur within cells [21]. To produce ribose-5-phosphate (R5P) for the cell, for the synthesis of the nucleotides and nucleic acids [21]. Can metabolise dietary pentose sugars that are derived from digestion of nucleic acids [21]. These also rearrange the carbon skeletons of dietary carbohydrates into glycolytic/gluconeogenic intermediates [21]. 4.1.1 Disorders of the Pentose Phosphate Pathway There are three inborn error in the pentose phosphate pathway that have been identified [21]. 4.1.2 Glucose-6-phosphate dehydrogenase deficiency The enzyme glucose-6-phosphate dehydrogenase (G6PDH), catalyses the reaction that converts glucose-6-phosphate to 6-phosphogluconate. This creates one mole of NADPH each for every mole of glucose-6-phosphate (G6P) that enters the PPP [21]. A deficiency would lead to an error to the first irreversible step of the pathway [21]. This would lead further to a lower production in NADPH, making the cell more acceptable to oxidative stress [21]. G6PDH is very important for Erythrocytes metabolism [21]. A deficiency could lead Individuals to nonimmune hemolytic anaemia which can be caused by, infection or exposure to certain medications or chemicals [21]. G6PDH deficiency is also linked to favism [21]. It is thought to be an X-linked recessive hereditary disease [21]. 4.1.3 Ribose-5-Phosphate Isomerase Deficiency A recent study have shown that a patient with of ribose-5-phosphate isomerise deficiency, had developed progressive leucoencephalopathy and, developmental and speech delay [21]. They did further studies using NMR and found that polyols ribitol and D-arabitol concentration was abnormal in body fluids [21, 22]. They did their studies on fibroblasts and found that the enzyme gene-sequence analysis showed a frame-shift and a missense mutation [22]. 4.1.31 Metabolic Derangement Ribose-5-phosphate isomerase deficiency would mean that the reversible reaction converting ribose-5-phosphate to ribulose-5-phosphate and vice versa will halt [22]. If there was no deficiency ribulose-5-phosphate would be converted to xylulose 5-phosphate, which will provide the substrates for transketolase and further conversion into glycolytic intermediates [22]. Studies have found that there are two mutant allele one from each parents that results in ribose-5-phosphate isomerise gene that causes the deficiency [22]. So it could be an autosomal recessive inheritance disorder [22]. The best way to do a diagnostic test for Ribose-5-phosphate isomerase deficiency would be to take a urine sample [22]. Polyols ribitol and D-arabitol would be analysed [22]. Also enzyme assay can be used to sequence the ribose-5-phosphate isomerise gene [22]. 4.1.4 Transaldolase Deficiency Some studies have been done where three unrelated families had Transaldolase deficiency [23]. One patient had aortic coarctation where the aorta narrows [23]. During the patients life they found that ammonia was rising. But neurological and intellectual development has been normal. Another patient had HELLP syndrome (hemolysis, elevated liver enzymes and low platelet count) [23, 24]. Children with transaldolase deficiency have been diagnosed have found that the development of intellectual and neurological showed no abnormalities [23, 24]. But there is a strong link to liver cirrhosis which results from increased cell death of hepatocytes and biliary epithelial cells [23, 24]. 4.1.41 Metabolic Derangement Transaldolase catalyses the reaction: Sedoheptulose 7-phosphate + glyceraldehyde 3-phosphate erythrose 4-phosphate + fructose 6-phosphate [59]. It is a reversible reaction in the pentose phosphate pathway. The deficiency lead to the accumulation of polyols derived from the pathway intermediates: erythritol, arabitol and ribitol [59]. Studies have shown that all patients were homozygous for these specific mutations, suggesting autosomal recessive inheritance [23, 24]. A simple urine test can be done to diagnose of transaldolase deficiency, mainly because there is a high concentration of arabitol and ribitol in urine. Also enzyme assay can be used to sequence the gene [23, 24]. Liver transplant would be the only option with patients that have severe liver cirrhosis [23, 24]. 4.2.0 Insulin secretion by the pancreatic ß-cell In the production of insulin glucose enters the ß-cell through a GLUT2 transporter where it is phosphorylated to glucose-6-phosphate by the enzyme glucokinase [58]. The enzyme is used as a control, where it monitors the level of glucose [58]. As blood glucose raises the rate of glucose metabolism also increases, where the cell will undergo glycolysis generating ATP [58]. This increase of ATP concentration causes K+ channels to close, making the membrane depolarised [58]. This depolarisation causes the voltage sensitive Ca2+ channels to open and Ca ions flood in, stimulating insulin secretion by exocytosis from storage granules; this is shown in Fig. 2. 4.2.1Persistent Hyperinsulinemic Hypoglycaemia Hyperinsulinism has been diagnoses in all ages but it is very common in childhood [25]. Persistent hyperinsulinemic hypoglycaemia (PHHI) is the one of the main cause of hypoglycaemia especially in young children. Patients who are older, that develop PHHI are due to pancreatic adenoma [25]. Hypoglycaemia when there is an overproduction of insulin by the ß-cells in the pancreas [25]. Hypoglycaemia can produce a variety of symptoms the most dangerous is brain damage which can lead to death, and that is why treatment is vital [25]. PHHI has two histopathological lesions that can be easily distinguished, making PHHI a heterogeneous disorder [25]. Focal hyperinsulinemic hypoglycaemia (FoPHHI) is caused by loss of heterozygosity which is a somatic event [25]. This causes focal adenomatous hyperplasia, which is a pancreatic lesion [25]. They are treated with pancreatectomy, where they surgically remove part of the pancreas. Diffuse hyperinsulinemic hypoglycaemia (DiPHHI) is also a heterogeneous disorder, in that fact that it is unable to encode for proteins needed for insulin secretion [25]. This can also be caused autosomal recessive and dominant genes which are rare [25]. Positron emission tomography (PET) is used to distinguish between focal and diffuse PHHI [25]. This gives a 3D image or picture of functional processes in the body [25]. Once a patient is diagnosed with PHHI, they are on treatment straight away with glucose and glucagon [25]. 4.2.12Metabolic Derangement Hyperinsulinemic hypoglycaemia is due to insulin hypersecretion by the pancreas [25]. The Action insulin causes a decrease in plasma glucose by inhibiting hepatic glucose release from glycogen and gluconeogenesis, and by increasing glucose uptake in muscle and fat [25]. PHHI is a disorder that is caused by a variety of defects, either in regulation of insulin secretion, unable to transcribe the enzymes needed of even a modified receptor [26]. For example diseases that can affect the ion channels like seizures [27, 28, 29]. Also lack of enzyme production of glucokinase (GK), and glutamate dehydrogenase (GDH) [30, 31]. Epidemiology has found that 1/50,000 patients are born with PHHI [32, 33]. Focal hyperinsulinemic hypoglycaemia is strongly linked to mutation of the sulfonylurea-receptor and the K+ channels, both used to depolarise the cell [32, 33]. Both are found to be located on the chromosome 11p15 [32, 33]. To identify these mutations they would need to be tested in a foetus or embryo before it is born. Sulfonylurea-receptor gene (SUR1) will not respond to diazoxide, which is used as a K+ channels activator [34]. Studies have found that a high activity of the enzyme glutamate dehydrogenase (GDH) has resulted to hyperinsulism/hyperammonemia syndrome. This would make sense as GDH is needed to produce insulin and this would impair detoxification of ammonia in the liver [31]. The enzyme glucokinase (GK) is also expressed highly, where the affinity is increased for glucose, causing high levels of insulin secretion [30]. 4.2.13 Diagnostic Tests Diagnostic of HI is easy, in the fact that, it can be indicated by the levels of glucose in the blood. Treatment varies from age [35]. Hyperammonemia should be treated as another disease, when a patient has PHHI, when treating hyperinsulism/hyperammonemia syndrome. This can be done by analysis of urine organic acids and plasma acylcarnitines [36]. Patients who show the FoPHHI can have lesion ranging from 2.5 to 7.5 mm in diameter [37, 38]. People who have DiPHHI found that there was ß-cells that were abnormal [39]. Pancreatic venous catheterization (PVS) and pancreatic arteriography have proven very useful in locating the site of insulin secretion [40, 41]. PVS procedure will have to able to maintain blood glucose level, which is between 2 and 3 mmol/l. Blood sample would then be taken from the pancreas to measure 3 things 1.plasma glucose, 2.insulin and 3.C-peptide levels [40, 41]. Studies have shown that people with FoPHHI tend to have high concentration of plasma insulin and C-peptide levels in some samples and low concentration in others [40, 41]. People who have DiPHHI tend to find that all their sample have high concentration of plasma insulin and C-peptide [40, 41]. The use of [18F]-labelled fluoro-L-DOPA whole-body positron emission tomography (PET), has proved to be very useful in detecting hyperfunctional islet pancreatic tissue, where this can be used on patients with focal lesion [42]. Recent studies have shown that a new technique have been use to locate focal lesion and separate focal from diffuse forms of HI; this is the tolbutamide test [44, 45]. 4.2.14 Treatment and Prognosis Brain damage can occur if you are hypoglycaemic, so treatment needs to be quick. Glucagon would be given, where the patient would have to take 1 to 2 mg per day if blood glucose levels are unstable [35]. To treat PHHI, diazoxide would be given, usually at a dose of 15-10 mg/kg/day depending on your age [35]. Normal blood glucose levels should be between 4 and 7 mmol/l, before and after a meal [56]. This could need to be check every time once taking diazoxide [35, 56]. Octreotide treatment, can also be used as it is a hormone inhibitor [46]. But a high could lead to a more severe hypoglycaemia, as it can inhibit glucagon and growth hormone [46]. Patients will find that after treatment with octreotide, they might vomit or have diarrhoea [46]. Calcium-channel blockers could be used, such as Lercanidipine and Pranidipine [46]. These treatments that have been mentioned are very effective in controlling blood sugar [46]. If a patient is diagnosed with FoPHHI, the treatment tends to be surgical as drugs are ineffective [46]. They would undergo pancreatectomy. This procedure has its risk as the patient might develop diabetes mellitus [46]. DiPHHI patients have been found to have large nuclei in the ß-cells [35, 47]. And patients with FoPHHI showed no abnormal s-cell nuclei but did show shrunken cytoplasm [49, 50]. 4.3 Glucose Transporter Deficiency Monosaccharides such as glucose and fructose have the properties of being hydrophilic [59]. The lipid bilayer has hydrophilic heads and hydrophobic tails, prevent polar molecule such as glucose from diffusing across the membrane [59, 60]. So transport mechanisms are needed. These are hydrophilic pores allowing polar molecules to diffuse in and out of the cell [59, 60]. There are two types of glucose transporters. 1. Sodium-dependent glucose transporters (SGLT), which have been found to be located in the small intestine and the proximal tubule [59, 60]. SGLT uses the difference in concentration of sodium to transport glucose [59, 60]. From high to low concentration of sodium causes the transport of glucose against its own concentration gradient [59, 60]. 2. Facilitative glucose transporters (GLUT), which has been found throughout the body, but manly in muscle and pancreas cells [59, 60]. These transporters transport glucose from high to low concentration [59, 60]. Studies have shown that there are four defects in the transport of monosaccharides [59, 60]. These defects can depend on where the transporters are located within the body and what they transport in and out of the cell [59, 60]. As already stated there are four defects. 1. SGLT2, which is found in renal tubulus cells that can cause renal glucosuria [59, 60]. 2. SGLT1, which is found in the intestine, which can cause glucose-galactose malabsorption [59, 60]. 3. GLUT2, a transporter that carries glucose to the liver kidneys and pancreas [59, 60]. 4. GLUT1 is important, in the fact that it carries glucose to the brain cell (neuron and glia cells)

Competition in the banking industry

Competition in the banking industry The banking system of a country plays a vital role in social welfare of the people in the country and of people of the world in general. It offers services to enterprises and consumers to undertake their business activities and to easily perform their day-to-day transactions. It is necessary to ensure an efficient functioning of the banking system; otherwise, a dull and bogus banking system brings about an ultimate threat of potential for financial instability. That is the reason why the competition in financial sector is of much importance. The importance is for many reasons; i.e. it relates to the efficiency, quality and innovation of the production of financial services. Most importantly, it helps in taking careful decisions in policy making for banks (Claessens and Laevens, 2003). In recent years, a lot of research work has been carried out, investigating the nature of competition in the banking industry along with the degree of competition, factors affecting the competition and the effects of competition on other market factors on micro level as well as on macro economic level. An explanation for the vast amount of studies on this topic is that competition can not be measured directly due to the lack of detailed information on prices and costs of the various banking products (Bikker et al., 2007). This topic has also gained popularity among bankers, economists and policy makers because of globalisation, liberalization of financial markets and banking harmonization all over the world, especially in the European Union. Since early 90s, there are a lot of regulatory changes observed in the banking industry in order to achieve the establishment of a single, competitive market in the financial sector of Europe. It was initially triggered with the implementation of the Second Banking Coordination Directive defining conditions for Single Banking License. As a consequence, entry barriers have been removed substantially for the new entrants increasing competition, coupled with a significant consolidation process. The intuition behind this was Market Contestability; a market is contestable if there are no barriers to entry, exit is absolutely costless and the prices are highly elastic to demands for industry output. The key idea is that a firm may be compelled to be more competitive and efficient by the prospect of new entrants (Allen and Engert, 2007). Furthermore, costless exit means that if a firm enters into a new market and then decides to withdraw, it is required to recover sunk entry costs. These features insure that even if a market has a small number of active firms, it is still effectively contestable and competitive (Nathan A. and Neave E., 1989). Moreover, the pro-competitive deregulation process has increased the level of competition (Cetorelli, 2004), particularly in non-traditional and non-interest bearing areas of banking activity (Goddard et al. 2001). Trivieri F. (2005) documents that in the course of the 1990s, the Italian banking system underwent profound changes at normative and institutional levels, which led among other things to a significant relaxation of the entry barriers, to the liberalisation of bank branching, to the redefinition of ownership structure and to a large number of mergers and acquisitions. The effects of these transformations and, in particular, of those linked to the process of consolidation have been studied by many authors (see, among others: Resti, 1997; Angelini and Cetorelli, 2000; Messori, 2001; Sapienza, 2002; Focarelli et al., 2002; Focarelli and Panetta, 2003). According to European Central Bank 1999, 29 percent banks had been merged or shrunk between 1985 and 1997. In Italian banking industry, the Second Banking Directive was implemented in 1993, followed by a 20 percent reduction in the number of banks as a result of consolidation. It is observed that competition has been increased in recent years in European banking markets which is also generally true for Italy. Angelini and Cetorelli (2000) cite that a rise in the competition is easily found in European banking markets during recent years. Danthine, Giavazzi, Vives and von Thadden (1999) report a somewhat generalized decrease in banks net interest margins across Europe during the 1990s. Consistent with the European evidence, a declining trend in bank margins is also observed across different markets in Italy. This paper focuses only on the banking industry of Italy and analyzes the evaluation of competitive conditions, nature and the degree of competition in the Italian banking industry using firm-level balance sheet data. In this paper, we explore more thoroughly the competitive nature and degree of competition in the Italian banking industry by adopting a methodology developed in empirical industrial organization and used extensively in banking. Further more, we will compare our results with previous results to find out that whether the degree of competition has been increased or it has been as same as it was in the past. The setup of the remainder of this paper is as follows. Section 2 contains some important information about structure and features of a competitive banking industry which helps in understanding the competition more thoroughly. Next Section 3 introduces the original Panzar-Rosse model along with the previous studies in the field. Section 4 gives a brief explanation of the general Panzar and Rosse model. This section also shows the interpretation of the H-statistic along with the description of the testing hypothesis. Following Section 5 deals with the empirical model used in this study including long-run equilibrium test. This section also contains the banks data used for the empirical illustration for our theoretical findings. Finally in the last Section 6 empirical results and conclusion is discussed. OPTIMAL COMPETITIVE STRUCTURE OF THE BANKING SYSTEM According to Northcott C. (2004), competition improves efficiency and growth in the banking sector but market power or concentration is necessary for stability in the industry. Moreover, competitive environment promotes productive and allocative efficiency leading towards economies of scale while market power improves credit availability, stability, quality of banks loan portfolios, screening of loans and monitoring them. As a result, market power should not be eliminated, but rather used to facilitate an environment that promotes competitive behaviour. FEATURES OF A COMPETITIVE BANKING INDUSTRY Concentration weakens competition by fostering collusive behaviour among firms. Increased market concentration was found to be associated with higher prices and greater than normal profits (Bain, 1951). Smirlock (1985) and Evanoff and Fortier (1988) argue that higher profits in concentrated markets could be the result of greater productive efficiency. Berger (1995) finds some evidence that the efficiency hypothesis holds in US banking. In Europe, on the other hand, structural factors appeared to be more important and the SCP hypothesis seemed to hold (Goddard et al., 2001). If a well-developed financial system is provided then contestability improves with new entrants. Contestability is not necessarily related to concentration or the number of banks. Concentration and competition can exist together because of the presence of asymmetric information and branches and the effect and use of new technologies. (Northcott C, 2004) LITERATURE REVIEW AND THEORETICAL ISSUES: According to Bikker and Haaf (2000), initially the economic literature on the issue of competition in the industrial sector can be divided into two main categories; structural approach and non-structural approach. Structural approach can be further divided into two main paradigms. First type of structural approach is Structure-Conduct-Performance (SCP) paradigm, which tells us that the degree of competition is determined by the structural characteristics of the market, such as, number of firms, size of the firms, etc. The SCP was developed in the early 1950s by Mason (1939) and Bain (1951). Bain (1951) constructs the market power hypothesis that collusive behaviour is initiated by high concentration which results in large profits for firms. Later, Stigler (1964) and Demsetz propose efficiency hypothesis in contrast of marker power hypothesis stating that the efficiency of bigger firms may be the reason for high concentration instead of collusive behaviour of firms, while during 1980s, Baumol, Panzar and Willig (1983) build contestability hypothesis. Their hypothesis states that if entry and exit barriers are relaxed then competition may be prevailed (Mkrtchyan A. 2005). Second approach is Efficient-Structure-Hypothesis (ESH), which states that greater concentration in the industry not only increases the level of efficiency in the sector but also increases the degree of competition in that sector. Non-structural approach is based on describing the nature of competition in the context of the studies of New Economic Industrial Organization (NIEO). It suggests non-structural models to analyse the competition in markets which do not rely on the markets structure. Particularly, Klein (1971), Baumol, Panzar, and Willig [1982] provide a theory that shows that market competitiveness can be inferred irrespective of the structure of the market. NIEO studies include Iwata Model (1974), Brasnahan Model (1982), Rosse and Panzar (1977), Panzar and Rosse (1982), Panzar and Rosse Model (1987), etc. Non-structural method or firms input-output cost studies have gained more popularity than the structural approach among academics, researchers, analysts and policy makers. Particularly Panzar and Rosse model (1987) is the most widely used and is very popular model for competition. Duncan (2003) mentions that the Panzar and Rosse (P-R) model provides a comprehensive and simple method to calculate the competition. It does not require intensive data as compared to other models and has been firmly related to theoretical side. The information required for this model is easily available as it calculates the sum of the factor prices elasticities estimated from a reduced form of revenue function. The Rosse-Panzar test has been developed to examine competitive conditions in the light of the contestability theory (Rosse and Panzar, 1977; 1982; 1987). This approach measures the degree of competition by analyzing how each banks revenues react to changes in input prices. It has primarily emerged to test market conditions that encompass all spectrums of competitiveness away from the restrictions brought about by the structural concepts. Basically, it depends on the relationship between gross revenues of the firm and the change in its input prices by using a statistic which is called the H-statistics that measures the sum of elasticities of total revenue with respect to each input price. As this approach includes the revenue equation so for banks, mainly the revenues are interest revenue. In this approach, h-statistics is used to measure the degree of competition. The H-statistics will tell us the responsiveness of revenues to the changes in input prices. If h-statistics is less t han or equal to zero then there will be monopoly, if it is between zero and one then there will be monopolistic competition and if it is equal to one then there will be perfect competition (Greenberg J. and Simbanegavi W.). This approach is preferred when testing the data of different individual banks. Moreover, P-R approach yields similar results without any ambiguity as it has clearly defined hypotheses with specific interpretations. PREVIOUS GENERAL STUDIES ABOUT BANK COMPETITION: Rearrange the literature review according to the claessens and neave. A great number of papers have been written on investigating competition in the banking industry using Panzar and Rosse model (1987). But the motivations for analyzing the nature of the competition are vastly varied like contribution of institutional and structural factors, growth, regions, stability, financing, efficiency, contestability, consolidation, cross-border capital flows, risks etc. The summary of the previous works and their findings can be seen in the Appendix Table 1. Panzar J. and Rosse J. (1987) develop test for Monopoly and use linear regression model to estimate the H-statistic for the newspaper industry, reporting that it is vague to conclude that the newspaper firms earn oligopoly profits. Looking at the cross-country studies carried out in the EU banking markets, one of the earliest analysis is undertaken by Molyneux et al. (1994) who test the Panzar-Rosse statistics on a sample of banks in France, Germany, Italy, Spain and the UK for the period 1986-89. Results indicate monopolistic competition in all countries except Italy where the monopoly hypothesis can not be rejected. Shaffer and Disalvo (1994) use this test to analyze the data of a duopoly banking market in south central Pennsylvania to exercise the procedure for concentration and competitive conduct. Waleed Murjan and Cristina Ruza (2002) examine the Arab Middle Eastern banking markets with this test concluding that the banking sector is more competitive in non-oil-producing countries than the banking industry in oil-producing countries. Gelos and Roldos (2002) apply this method on 8 different countries of Latin America and Europe, finding that market contestability prevents the competitive pressure from declining which can happen because of the consolidation while Claessens and Laeven (2003) process the data of 50 countries obtaining the same results. Bikker and Haaf (2002) assess the banking industry in 17 European countries and six countries that are outside of Europe comparing competitive conditions and market structure. Goddard, J. and Wilson, J. (2006) report misspecification bias in the revenue equation for the banking sectors of 19 developed and developing countries. They suggested a dynamic revenue equation for unbiased estimation rather than fixed effects estimation which is severely biased towards zero. Gilbert (1984) and Berger (1995) test the data for 8,235 banks in 23 developed nations producing the results that a higher degree of market power has less risk exposure. Yuan Y. (2005) assesses the competition in Chinese Banking sector and comes up with the results that China already has had perfectly competitive condition before new foreign entrants and it still has the same situation. Duncan D. (2003) presents the empirical assessment of the market structure of the Jamaican banking sector and competitive trends in the market finding monopolistic behaviour. Al-Muharrami S. et al. (2006) take GCC Arab countries into observation and suggest that Kuwait, Saudi Arabia and the UAE operate under perfect competition; and Bahrain and Qatar operate under conditions of monopolistic competition. Nathan A. and Neave E. (1989) exercise the test on Canadian financial industry and reject the hypothesis of monopoly power in Canadas financial system. PREVIOUS STUDIES ABOUT COMPETITION IN ITALIAN BANKING INDUSTRY: A great number of studies on competition in financial sector of EU countries have been reported which also include Italy in general. But there are also some research-papers which are produced specifically for Italy. Some of them are: Cetorelli N. and Angelini P. (2000) study the case of the Italian banking industry and cite that competitive conditions have improved substantially after 1992, and it is believed that the introduction of the Single Banking License in 1993 also helps fostering the competitive behaviour in Italian banking industry. DellAriccia G. and Bonaccorsi E. (2003) investigate the relationship between bank competition and firm creation. They document that the effects of competition in the banking sector on the creation of firms in the non-financial sector are less favourable to the emergence of new firms in industries where information asymmetries are greater. Coccorese P. (2002) rejects the theory that competition can be easily reduced by the collusive behaviour of the firms, and comes up with the conclusion that strong concentration does not necessarily prevent competition among firms. Trivieri F. (2005) compares the banks involved in the cross-ownership and banks that are not involved. He finds that Italian banks involved in cross-ownership are less competitive than the banks which are not involved in cross-ownership, hence proving cross-ownership decreases competition. GENERALIZED PANZAR AND ROSSE (1987) APPROACH: P-R model assumptions: Firstly, there are some assumptions and conditions in which Panzar and Rosse model works. The model supposes that banks operate in long run equilibrium. Although Goddard Wilson (2006), documents that this condition is not needed any more if a correctly specified dynamic revenue equation is adopted which permits virtually unbiased estimation of the H-statistic. This eliminates the need for a market equilibrium assumption, but incorporates instantaneous adjustments as a special case. So in this paper long run equilibrium postulate holds. Another assumption is that the market participants affect the performance of the banks by their actions. Another postulate is that the price elasticity of demand is greater than unity. Moreover, the model posits that there is a homogenous cost structure. Furthermore, profits are maximised to obtain the equilibrium number of banks and the equilibrium output. In long rum equilibrium, it is known that banks maximise their profits when, marginal revenue eq uals to marginal cost (Bikker and Haaf, 2000). Trivieri F. (2005) also adds that the banks are treated as single product firms which mainly provide intermediation services. EXPLANATION OF PR MODEL: Claessens and Laeven (2003) cite that the Panzar and Rosse model studies the impact of changes in factor input prices reflected in equilibrium revenues by a specific bank. Bikker and Haaf (2000) write that Panzar and Rosse model gives simple models for oligopolistic, competitive and monopolistic markets. This test works on the reduced form revenue equation and uses H-statistics. This H-statistics can tell us not only the nature of competition but also gives information about the degree of the competition. H-statistics if measures between 0 and 1, it is monopolistic competition, 0 is considered as monopoly and 1 as perfect competition. Here, a general banking market model is used, which determines equilibrium output and the equilibrium number of banks by maximising profits. The model is also able to allow for bank-specific variables in the equation. According to Bikker and Haaf (2000), in the long run equilibrium, it is known that banks maximise their profits at the break-even point. The break-even point is where marginal revenue equals marginal cost. So, the bank i maximises its profits, where marginal revenue equals marginal cost: (1) Ri refers to revenues and Ci to costs of bank i (the prime denoting marginal), xi is the output of bank i, n is the number of banks, wi is a vector of m factor input prices of bank i, zi is a vector of exogenous variables that shift the banks revenue function, ti is a vector of exogenous variables that shift the banks cost function. Secondly, it means that in equilibrium at the market level, the zero profit constraint holds (Bikker and Haaf, 2000): (2) Variables marked with an asterisk (*) represent equilibrium values. Panzar and Rosse define a measure of competition H as the sum of the elasticities of the reduced-form revenues with respect to factor prices (Bikker and Haaf, 2000): (3) According to Khan, M. (2009), it measures the percentage change in (equilibrium) revenue due to a one percent change in all input factor prices (change in cost). From duality theory, it is known that one percent increase in factor prices will lead to one percent upward shift in cost function. The impact of this shift in cost function on the (equilibrium) revenue of the banks is directly related to the degree of competition in the banking sector. Bikker and Haaf (2000) further explain that Panzar and Rosse prove that under monopoly or under perfectly collusive oligopoly, an increase in input prices will increase marginal costs, reduce equilibrium output and subsequently reduce revenues; hence H will be zero or negative. An increase in input prices raises both marginal and average costs by an equal proportion as the cost is homogeneous of degree one in input prices without altering the optimal output of any individual firm. Exit of some firms increases the demand faced by each of the remaining firms, thereby leading to an increase in prices and total revenues by as same amount as the rise in costs, resulting perfect competition where H-statistic is positive but not greater than unity. In this case marginal and average cost will be increased by the rise in input prices (Nathan A. and Neave H., 1989). INTERPRETATION OF H-STATISTICS: Panzar and Rosse prove that, under monopolistic competition, H is between zero and unity. H is a decreasing function of the perceived demand elasticity, so H increases with the competitiveness of the banking industry. As a result, this H-statistic can serve as a continuous interpretation of the competitiveness. Although this is not mentioned by Panzar and Rosse (1987) but with some assumptions this continuous interpretation is correct. So, the testable hypotheses are: The banking industry is characterised by monopoly for H=0, monopolistic competition for 0 HYPOTHESIS TESTING; Khan, M. (2009) mentions: Two-sided Perfect Competition Test: Maintaining the long run equilibrium postulate, if banks are operating under perfect competition, a one percent change in cost will lead to a one percent change in revenues. Output will not be changed if the demand function is perfectly elastic under perfect competition, output price and cost both will increase by the same extent. This implies that under perfect competition, H-statistic will be equal to one. Statistically, we will test the following hypothesis. H0 : H = 1 Perfect competition prevails in the banking sector. H1 : H à ¢Ã¢â‚¬ °Ã‚   1 There is no perfect competition in the banking sector. Two-sided Monopolistic Competition Test: If banks are operating in monopolistically competitive environment, one percent increase in cost will lead to less than one percent increase in revenue as the bank faces fairly inelastic demand function. Statistically, we will test the following hypothesis. H0 : 0 H1 : H à ¢Ã¢â‚¬ °Ã‚ ¤ 0 or H à ¢Ã¢â‚¬ °Ã‚ ¥ 1 Banks are not operating in a monopolistic competition environment. One-sided Monopoly Test: Standard theory of market structure suggests that the sum of factor input price elasticities should be less than zero if the underlying market structure is monopoly. Statistically, we will test the following hypothesis. H0 : H à ¢Ã¢â‚¬ °Ã‚ ¤ 0 Banks are operating in a monopoly condition. H1 : H > 0 Banks are not operating in a monopoly condition. (Khan M., 2009) EMPIRICAL FRAMEWORK AND METHODOLOGY: The test is robust with any definition of market whether it is within the national boundaries or it is the global international banking industry because there is no need to specify a geographic market. Before testing, it is commonly necessary to obtain a reduced form of revenue equation which consists of revenue as a dependent variable, factor input prices as independent variables and some controlled or firms specific factors. The basic equation is: Total interest revenue = total cost + controlled variables + error term The panel data is used in the paper which is the data collected over multiple time periods. It is the combination of cross-sectional and time series dimensions. Hence, it can be derived as: Ci = a + Byi + Ei (4) Ct = a + Byt + Et (5) Where, C is the dependent variable, a is constant term, B is the coefficient of the independent term, y is the independent variable and E is the error term. Combining both the equations (4) and (5), the final basic equation can be given as: Cit = a + Byit + Eit (6) But Panzar and Rosse define the H as the sum of the elasticities of the reduced-form revenues with respect to factor prices, so the econometric model of the Panzar and Rosse statistic may be represented by the following equation: (7) For i = 1,..I; t = 1,T; Where, R is a measure of gross revenue. W is a vector of factor prices (the H statistic is given by the sum of the estimated coefficients of the variables in this vector); S is a vector of scale variables; X is a vector of exogenous and bank-specific variables that may shift the cost and revenue schedule, ÃŽÂ µ indicates the error term; I is the total number of banks; T is the number of periods observed (Trivieri, 2005). To calculate the sum of elasiticities, it is necessary to estimate the log linear model instead of estimating a simple linear model that is the reason for taking the log of all the variables in equation (7). The sign of the variables of different costs and bank specific variables are positive showing a direct relationship to revenues (Trivieri, 2005). In this pooled regression, extra intercepts or dummies for time are used, but dummies for individuals are not included because of the application of within-group-estimators. Because with-in-group estimator takes first difference and removes the individuals dummies variables by itself. Thus being a fixed effects model, it measures differences in intercepts for each group and the differences are calculated by a separate dummy variable for each group (Trivieri, 2005). The use of fixed effects panel regression with time dummies allows calculating the relevant parameters of the empirical model. Furthermore, unobserved heterogeneity is controlled by the fixed effects too avoiding omitted variable problems (Trivieri, 2005). In this paper, the intermediation approach developed by Sealey and Lindley (1977), is followed which tells that deposits, labour and capital are inputs for the banks. The empirical model applied in this paper is as: LGIRTA = B1LLABCOST + B2LCAPCOST + B3LFUNDCOST + B4LLTA + B5LBMIX (8) Where, LGIRTA = Log of Gross Interest Revenues over Total Assets LLABCOST = Log of Labour factor price LCAPCOST = Log of Capital Cost LFUNDCOST = Log of Funding Cost LLTA = Log of Loans to Total Assets LBMIX = Log of Loans to Banks and Clients over Total Loans This paper addresses the banking industry of Italy. The data includes 480 banks approximately, of all sizes in Italy. The data contains two different samples. First sample consists of the data from 1995 to 1997, total 3 years, and the second sample contains data from 1997 to 2000, total 3 years. We make a comparison and inference between the results obtained by these two samples through our empirical model and find out the competitive behaviour of Italian financial market. LONG RUN EQUILIBRIUM TEST: An important underlying condition of the H-statistic for competition is the long run equilibrium. Panzar and Rosse (1987) cite that this postulate is crucial for the cases of perfect competition and monopolistic competition. Though, it is not a fundamental assumption in the case of monopoly because when H is less than or equal to zero then it is a long run assumption for monopoly (Trivieri, 2005). Long run equilibrium test for the observations can be done with the prerequisite that: competitive markets equalise the return rates across firms, so that in equilibrium these rates should not be correlated with input prices (Trivieri, 2005). In our empirical model as in Shaffer (1982), this test can be carried out by re-estimating the equation with the proxy for the return on assets, ROA, as dependent variable in the calculation of H. In this context, H = 0 implies that the data are in long run equilibrium (Trivieri, 2005). The intuition behind this theory is that, return on assets, ROA, should not be related to input prices. De Bandt and Davis (1999), define the equilibrium condition as the state in which changes in banking sector are considered as gradual, long run equilibrium for the observations does not mean that competitive conditions remain the same and do not change through out the period of observations (Trivieri, 2005). Although it is inappropriate to use Rosse-Panzar test which is based on a static equilibrium framework, but in the real financial market, the equilibrium adjustments are less than instantaneous, resulting disequilibrium on some points in time or frequently, or always. Moreover, when it is known that the adjustments towards equilibrium are partial and not instantaneous then using fixed effects estimation for the static revenue equation will result in biased H-statistics toward zero (Goddard J. and Wilson J., 2006). For the long run equilibrium, we estimate the following equation: LROA = B1LLABCOST + B2LCAPCOST + B3LFUNDCOST + B4LLTA + B5LBMIX (9) DATA AND SAMPLE DESCRIPTION: The empirical part of this paper uses an unbalanced panel data set on which the Panzar and Rosse methodology has been applied containing a range of Italian banking firms. The data and the samples used for the estimation of H indicator are provided by Dr. Leone Leonida, Queen Mary, University of London. The data used in this paper are annual and refer to the period 1995-1997 (3 years) for the first sample. The first sample for the econometric analysis is made up of an unbalanced panel data of 480 financial institutions of all sizes, for a total of 1401 observations. The number of parameters is 487. The longest time series is 3 years long and the shortest time series is only 2 years long with 2 time dummies. The second sample covers the period of 1998-2000 (3 years) having 1330 number of observation from 474 banks of all sized. The number of parameters is 481. The longest time series is 3 years long and the shortest time series is 2 years long depicting unbalanced panel data with 2 time dummies. In the Appendix, Table 3 provides a summary of the definition of relevant dependent variable, independent variables, bank specific factors variables and control variables. LGIRTA is the log of gross interest revenue over total assets, which is used as dependent variable, also used by De Bandt and Davis (2000), and Trivieri F. (2005). Trivieri (2005) points out that according to Vesala (1995) and De Bandt and Davis (2000) it is the most appropriate choice because it then represents a price equation and not the revenue equation. Moreover, our equation will be consistent with the conceptual structure used by the application of Panzar and Rosses statistic to the banking sector. The choice for taking only the interest part of the total revenue of banks is consistent with underlying notion of the P-R model that financial intermediation is the core business of most banks. However, Shaffer (1982) and Nathan and Neaves (1989) have included total revenue instead of only interest revenue because of the fact that banks have increased their non-interest activities and services which have started generating income other than interest. But s