Recovering Risky Technologies Using The Almost Ideal Demand System: An Application To U.S. Banking

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2000-05

Classification and Topics

• Classification: Wirtschaft ; Production and Organizations: General ; Firm Behavior: Theory ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: agency problems ; banking ; efficiency ; production ; risk

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hughes, Joseph P. ; Mester, Loretta J. ; Lang, William ; Moon, Choon-Geol
• Event: Veröffentlichung
• (who): Rutgers University, Department of Economics
• (where): New Brunswick, NJ
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/94280
• Last update: 10.03.2025, 11:45 AM CET