Reallocation costs, reference-dependent profit function and inefficiency

Bator Anne and Walter Briec ()
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Bator Anne: University of Perpignan
Walter Briec: University of Perpignan

Journal of Economics, 2025, vol. 144, issue 2, No 1, 107-138

Abstract: Abstract The objective of this paper is to propose a theoretical framework where firms are maximizing profit taking into account a reallocation cost. This we do by introducing a reference-dependent profit function. It is shown in this paper that such a reference-dependent profit function is a useful concept to partly explain the existence of inefficiency for firms. Along this line it is shown that one can construct a suitable dynamical process quantifying the catching up of firms to reach the production frontier at each time period.

Keywords: Reference dependent profit function; Inefficiency; Distance functions (search for similar items in EconPapers)
JEL-codes: D24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:144:y:2025:i:2:d:10.1007_s00712-024-00886-7

DOI: 10.1007/s00712-024-00886-7

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