Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94280
Authors: 
Hughes, Joseph P.
Mester, Loretta J.
Lang, William
Moon, Choon-Geol
Year of Publication: 
2000
Series/Report no.: 
Working Papers, Department of Economics, Rutgers, The State University of New Jersey 2000-05
Abstract: 
We argue for a shift in the focus of modeling production from the traditional assumptions of profit maximization and cost minimization to a more general assumption of managerial utility maximization that can incorporate risk incentives into the analysis of production and recover value-maximizing technologies. We show how this shift can be implemented using the Almost Ideal Demand System. In addition, we suggest a more general way of measuring efficiency that can incorporate a concern for the market value of firms' assets and equity and identify value-maximizing firms. This shift in focus bridges the gap between the risk-incentives literature in banking that ignores the microeconomics of production and the production literature that ignores the relationship between production decisions and risk.
Subjects: 
agency problems
banking
efficiency
production
risk
JEL: 
D20
D21
G21
Document Type: 
Working Paper

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