X-Efficiency: Lord for Leader??

Saturday, February 19, 2005

Lord for Leader??

It is still too early to talk about the next leader for the federal Tories. But this is definitely an interesting move for Mr. Lord - if the rumour mill is correct.

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"A monopolist may be X-inefficient either because it does not have an incentive to be more efficient due to lack of competition or it does not have the opportunity to observe and learn from other more efficient firms in the industry. In an industry high profits may imply high prices due to x-inefficiency. However, excess profits do not necessarily mean that consumers are paying higher prices. And, lack of excess profit does not necessarily indicate competition or cost efficiency." Leibenstein, Harvey. 1966. "Allocative Efficiency vs. 'X-Efficiency'," American Economic Review 56, (June), pp. 392-415