Recovering risky technologies using the almost ideal demand system: an application to U.S. banking

Joseph Hughes, William Lang, Loretta Mester and Choon-Geol Moon

No 00-5, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: The authors 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. The authors show how this shift can be implemented using the Almost Ideal Demand System. In addition, the authors 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.

Keywords: Banks and banking - Costs; Banks and banking (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-eff and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... pers/2000/wp00-5.pdf (application/pdf)

Related works:
Journal Article: Recovering Risky Technologies Using the Almost Ideal Demand System: An Application to U.S. Banking (2000)
Working Paper: Recovering Risky Technologies Using The Almost Ideal Demand System: An Application To U.S. Banking (2000)
Working Paper: Recovering Risky Technologies Using the Almost Ideal Demand System: An Application to U.S. Banking (2000)
Working Paper: Recovering risky technologies using the almost ideal demand system: an application to U.S. banking (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:00-5

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().