Too-big-to-fail" is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to

The household production approach to consumer behavior, developed from the work of Gary Becker, William Gorman, and Kelvin Lancaster, has considerable descriptive appeal in modelling the decisions of households. The approach derives from the observation that households frequently purchase market goods that do not yield utility directly, but are combined to produce commodity service flows which the household values. Thus observed behavior is determined by household production technology as well as by tastes. The advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology, though we rarely possess useful a priori information regarding tastes. The putative advantages of the household production approach are questioned on empirical and conceptual grounds by Robert Pollak and Michael Wachter (1975). They show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology, raising serious econometric difficulties in the estimation of commodity demand functions. In addition, since commodity prices become functions of the commodity bundle consumed, the analogy to traditional demand theory breaks down. Joint production occurs when a good enters several production processes simultaneously, or, equivalently, when a good in one production process also enters directly into the individual's utility function. The most common example is time, which provides the context for all production processes and is often associated with the production of several commodities simultaneously. Since joint production in the household is likely to be pervasive, the critique by Pollak and Wachter cannot be ignored. In response to the comment by William Barnett, Pollak and Wachter (1977) suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices. This approach confounds tastes and technology, but it eliminates the troublesome concept of commodity prices as parameters when, in fact, they are likely to be endogenous. In this paper we show that results from positive analysis, such as the critique by Pollak and Wachter, have implications for the use of the household production framework for welfare analysis. The household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas (Gardner Brown, John Charbonneau, and Michael Hay; Elizabeth Wilman). Yet traditional approaches to welfare measurement are frequently inapplicable. We argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology. We extend Pollak and Wachter's results by demonstrating that Marshallian demand functions for commodities cannot be uniquely defined. Thus Marshallian functions cannot be used to derive exact compensated functions in the manner of Jerry Hausman, and of George McKenzie and I. F. Pearce, nor can compensating and equivalent variation measures be bounded by Marshallian consumer's surplus estimates following Robert Willig. In fact, duality results that normally allow us to move between Marshallian and Hicksian functions are not *Assistant and Associate Professors, respectively, Department of Agricultural and Resource Economics, University of Maryland, College Park, MD 20742. This paper is Scientific Article No. A3404, Contribution No. 6476, of the Maryland Agricultural Experiment Station. We wish to thank Darrell Hueth, James Opaluch, V. Kerry Smith, and Elizabeth Wilman for comments on an earlier draft.

In a recent issue of this Review, David Grether and Charles Plott (1979, hereinafter referred to as G-P) presented a series of experiments that show that individual decisions are made in a manner inconsistent with standard preference theory. This inconsistency can be illustrated by the following example: Individuals under suitable laboratory conditions first have a choice between a lottery with a high probability of winning a small sum of money, the P bet (probability bet); and a lottery with a high stake but low probability of winning, the M bet (money bet). After indicating a preference for one of the lotteries in the pair, the same subjects are then asked to place a monetary value on each of the individual lotteries. Grether and Plott found that a large number of participants stated a preference for the P bet in the first round; but placed a higher value on the other lottery, the M bet, in the second round. This behavior, a preference reversal, is inconsistent with the traditional statements of preference theory.

Using account level credit-card data from six major commercial banks from January 2009 to December 2013, we apply machine-learning techniques to combined consumer-tradeline, credit-bureau, and macroeconomic variables to predict delinquency. In addition to providing accurate measures of loss probabilities and credit risk, our models can also be used to analyze and compare risk management practices and the drivers of delinquency across the banks. We find substantial heterogeneity in risk factors, sensitivities, and predictability of delinquency across banks, implying that no single model applies to all six institutions. We measure the efficacy of a bank's risk-management process by the percentage of delinquent accounts that a bank manages effectively, and find that efficacy also varies widely across institutions. These results suggest the need for a more customized approached to the supervision and regulation of financial institutions, in which capital ratios, loss reserves, and other parameters are specified individually for each institution according to its credit-risk model exposures and forecasts.

new econometric model of aggregate consumer behavior in the United States and to apply this model to the analysis of impacts of alternative economic policies on the welfare of individual consuming units. The model incorporates time-series data on quantities consumed, prices, the level and distribution of income, and demographic characteristics of the population. It also incorporates cross-section data on the allocation of consumer expenditures for households with different demographic characteristics. Our econometric model is based on the theory of exact aggregation developed by Lau (1977a, c). This theory makes it possible to dispense with the notion of a representative consumer in constructing models of aggregate consumer behavior. One of the most remarkable implications of Lau's theory of exact aggregation is that systems of demand functions for individuals with common demographic characteristics can be recovered uniquely from the system of aggregate demand functions. Using the individual demand functions we can analyze the impact of economic policy on consumer welfare.

ABSTRACT This paper reports five studies examining audit team members' willingness to raise audit issues. The first study is a survey of interacting audit teams that provides evidence that team members are more willing to speak up when they view their leader as team-oriented (i.e., emphasizing team success as opposed to the leader's own personal advancement). Experiments 1–3 provide converging evidence that audit seniors are more willing to speak up to a team-oriented leader and about issues that are aligned with that leader's concerns. Experiment 4 provides evidence that the effect of team-oriented leadership on willingness to speak up is mediated by team members' commitment to the team leader and, to a lesser extent, by their identification with their team, but not by concerns about the immediate or eventual repercussions of speaking up. Together, these studies provide evidence that auditors' willingness to raise audit issues is affected by what the auditor has to say and how they think their message will be received, potentially affecting audit effectiveness and audit efficiency. Data Availability: Contact the authors.

ABSTRACT This study examines local characteristics associated with non-Big 4 local market leadership and the impact of non-Big 4 local market leadership on competition. We identify non-Big 4 local market leaders by collecting accounting firm rankings from business publications for 46 of the largest metropolitan statistical areas from 2005–2010. These rankings are based on the number of local office employees and provide a more holistic measure of office size than measures based on public company audit fees. We find local supply and demand factors are significantly associated with non-Big 4 local market leadership and that non-Big 4 leadership is associated with lower overall audit fees in the local market. We also find that non-Big 4 leaders earn a fee premium over other non-Big 4 auditors. Our results imply that non-Big 4 leaders increase local market competition. Data Availability: All data are publicly available from sources identified in the study.

We study the effect of financial resources on decision-making. Low-income U.S. households are randomly assigned to receive an online survey before or after payday. The survey collects measures of cognitive function and administers risk and intertemporal choice tasks. The study design generates variation in cash, checking and savings balances, and expenditures. Before-payday participants behave as if they are more present-biased when making intertemporal choices about monetary rewards but not when making intertemporal choices about non-monetary real-effort tasks. Nor do we find before-after differences in risk-taking, the quality of decision-making, the performance in cognitive function tasks, or in heuristic judgments.