Stochastic Frontiers and Asymmetric Information Models
AbstractThis article is an attempt to shed light on the specification and identification of inefficiency in stochastic frontiers. We consider the case of a regulated firm or industry. Applying a simple principal-agent framework that accounts for informational asymmetries to this context, we derive the associated production and cost frontiers. Noticeably this approach yields a decomposition of inefficiency into two components: The first component is a pure random term while the second component depends on the unobservable actions taken by the agent (the firm). This result provides a theoretical foundation to the usual specification applied in the literature on stochastic frontiers. An application to a panel data set of French urban transport networks serves as an illustration.
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Bibliographic InfoPaper provided by HAL in its series Post-Print with number hal-00622849.
Date of creation: 2002
Date of revision:
Publication status: Published, Journal of Productivity Analysis, 2002, 18, 145-159
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00622849/en/
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Other versions of this item:
- Philippe Gagnepain & Marc Ivaldi, 2002. "Stochastic Frontiers and Asymmetric Information Models," Journal of Productivity Analysis, Springer, vol. 18(2), pages 145-159, September.
- Gagnepain, P. & Ivaldi, M., 1998. "Stochastic Frontiers and Asymmetric Information Models," Papers 98.503, Toulouse - GREMAQ.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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