We develop a two-period general equilibrium model of portfolio delegation with competitive, differentially skilled managers and convex compensation contracts. We show that convex incentives lead to significant equilibrium mispricing, but reduce price volatility. In particular, price informativeness and volatility may exhibit opposite behaviour. Investors do not internalize the externality that ...

This report presents results of a study of the potential for efficient and clean energy technologies to address a number of energy-related challenges facing the United States. These challenges include global climate change, air pollution, oil supply vulnerability, energy price volatility, and inefficiencies in energy production and end-use systems. Some of these concerns are visible today and a...

Asymmetric information regarding project prospects causes dilution, leading to adverse selection and inefficiencies in the market for new investments. However, if the market obtains information about the firm over time, issuing callable convertible securities with restrictive call provisions is optimal. Even when the market’s information is noisy, such securities can be designed to make the pay...

In this paper, we investigate the optimal choice of transfer pricing regulations from a normative point of view. In this context we put special emphasis on the treatment of business relocations. Two inefficiencies may arise: First, firms may structure a transaction as multinational enterprise (MNE) for tax reasons even though it would be welfare enhancing to carry out the transaction between un...

The stock market is forward looking; economic indicators and important future events are factored into stock prices. According to the Efficient Market Hypothesis†, markets operate efficiently and stock prices instantly and stock prices instantly reflect all information available. However, inefficiencies in the stock market exist due to the behaviors and expectations of investors. Stock prices m...

In an integrated dynamic general equilibrium model of the economy and the ecosystem humans and other species compete for land and prey biomass. Each submodel exhibits a price-driven competitive allocation mechanism, and the endogenously determined habitat is either openly accessible or privately owned. In both scenarios specific corrective taxes or subsidies are needed to internalize ecosystem ...

We study a model where multiple sellers with limited supply strategically choose both the price formation rule and the allocation rule. We show that inefficiency in this setting arises both because sellers withhold the good and because they sell to lower valuation buyers despite the presence of higher valuation buyers. This contrasts with the findings of the literatures on monopolistic and comp...

I present a tractable dynamic model of political economy where disagreements about the composition of public spending result in implementation of short-sighted policies. The relative price of investment to consumption is excessively large in equilibrium due to over-taxation. Investment rates are too low which slows down growth along the transition. In the long run, this results in output, consu...

We estimate the pricing efficiency of a livestock auction market using two-tier stochastic frontier model. This model captures inefficiency hedonic for via exponential error terms above and below specification. The direction inefficiencies, whether or model, represent surplus transfer from buyers to sellers buyers, respectively. Using data 7-year period in market, we found that on average extra...