We analyze a dynamic market with a seller who can make a one-time investment that affects the returns of tradable assets. The potential buyers of the assets cannot observe the seller's investment prior to the trade or verify it in any way after the trade. The market faces two types of inefficiency: the ex-ante inefficiency, i.e., the seller's moral hazard problem, and the ex-post inefficiency, ...

Social networks on the Internet have seen an enormous growth recently and play a crucial role in different aspects of today’s life. They have facilitated information dissemination in ways that have been beneficial for their users but they are often used strategically in order to spread information that only serves the objectives of particular users. These properties have inspired a revision of ...

Previous articles have noted the possibility of socially ineficient levels of entry in markets in whichJirms must incurjixed set-up costs upon entry. This article identijies thefundamental and intuitive forces that lie behind these entry biases. Ifan entrant causes incumbentJirms to reduce output, entry is more desirable to the entrant than it is to society. There is therefore a tendency toward...

We present the theoretical foundation for an adjustment cost technology that supports the intertemporal production decision making behavior using the directional distance function. Dynamic input efficiency measures are developed that can separate out the impact of variable and dynamic factors inefficiency levels. An approach to implement this theory in a nonparametric fashion is developed and a...

Revenue cap regulation is often combined with systematic benchmarking to reveal the managerial inefficiencies when regulating natural monopolies. One example is the European energy sector, where benchmarking methods are based on actual cost data, which are influenced by managerial inefficiency as well as operational heterogeneity. This paper demonstrates how a conditional nonparametric method, ...