X-Efficiency: For (Economic) Geeks and (Policy) Freaks!!

Friday, July 28, 2006

For (Economic) Geeks and (Policy) Freaks!!

If you are into economic and public policies, Mankiw's blog has a post where people are putting some very good links to other blogs. Here is the post.

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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