We analyze optimal correlation levels in information technologies when multiple signals are available as contracting mechanisms within the principal-agent paradigm. We identify sufficient conditions ensuring that uniformly lower-correlation functions (in action levels) are preferred, as well as...

We provide rankings across uncertain outputs generated by agents functioning within the Principal-Agent paradigm. For agents who are identical except for their productivity, a necessary (but not sufficient) condition for an agent to be preferred is that her output dominates that of lower agents...

Banker and Maindiratta (1992) provides a method for the estimation of a stochastic production frontier from the class of all monotone and concave functions. A key aspect of their procedure is that the arguments in the log-likelihood function are the fitted frontier outputs themselves rather than...

Legal penalties and liability insurance seem to have counteracting effects on the incentives of a potential injurer to take due care. However, if legal penalties are set efficiently and implemented perfectly, unrestricted access to insurance can be optimal. In contrast, if the standards of guilt...

This study endogenously generates the asymmetric verification concept of conservatism, using evolutionary biology as a foundation. A producer produces (or hunts) a consumable with a stochastic production technology, and possibly faces a stealer thereafter, who seeks to expropriate the...

We examine a firm's price-to-earnings (P/E) and price-to-book (P/B) ratios in a model of sequential capacity investments. Our analysis focuses on several key variables, including past and anticipated future investment growth, economic profitability and accounting conservatism, which jointly...

Under rate-of-return regulation, a firm's product prices are constrained by the requirement that investors not earn more than an allowable return on the firm's assets. This paper examines the dynamic properties of the rate-of-return regulation process when the regulated firm periodically...