Electric utilities in the United States are subject to a cost‐plus normal profits pricing that is designed to align the market value of equity with the balance sheet book value. Perfect alignment implies the equality of the market and book values. Extant empirical evidence suggests that, for these utilities, actual cost/profit recovery does not follow a pure cost‐plus pricing, raising the prospect that income statement items contribute to the determination of market value. What is not obvious is the extent to which the noted departure from pure cost‐plus pricing results in misalignment of the market and book values, or the relative contribution of income statement items to the valuation of electric utility shares. This study pursues this question, using benchmark results for a sample of manufacturing firms to highlight the degree of market‐to‐book alignment for regulated and competitive firms. The results show a considerable alignment of the market and book values for utilities. In examining the relevance of book value and income statement items in the determination of market value, it is found that the contribution of earnings level to explaining market value diminishes markedly in the presence of book value for electric utilities, and the contribution of earnings change to explaining returns diminishes markedly in the presence of earnings levels. Earnings level complements book value in explaining market value for manufacturing firms, while earnings change complements earnings level in explaining returns. The results further show that the market and accounting values exhibit pronounced misalignments in returns‐earnings models, especially for utilities.

It has now been over twenty-five years since Arnold Harberger (1971) published his open letter to the profession, in which he proposed a set of guidelines for applied welfare economics. Since then, there has been great progress in the implementation of measures of welfare that are ordinally equivalent to household utility. While welfare measurement at the micro level is of independent interest, of greater practical concern is the issue of the well-being of groups of households. In the second half of the survey, I examine the issue of the aggregation of welfare across households and describe a framework that provides a consistent ranking of social outcomes.

In this paper we examine tender offer share repurchases to differentiate between the information signaling and free cash flow hypotheses. Previous work in this area has focused on announcement period returns. While we also examine announcement returns, our primary emphasis is on operating performance changes surrounding repurchases. We argue that the information contained in changes in operating performance, and its determinants, enables us to differentiate between the two hypotheses. Our primary finding is that operating performance following repurchases improves only in low-growth firms, and that these gains are generated by more efficient utilization of assets, and asset sales, rather than improved growth opportunities. Thus, repurchases do not appear to be pure financial transactions meant to change the firm's capital structure but are part of a restructuring package meant to shrink the assets of the firm. This evidence leads us to conclude that the positive investor reaction to repurchases is best explained by the free cash flow hypothesis.

Brokerage contracts for many categories of real assets are characterized by a common, constant commission rate payable upon sale, exclusive agency, and contractual asking prices. For a large market in steady state, these conventional contracts produce in equilibrium no agency problem between a broker and his clients. Each broker spends the same time or effort selling each client's asset as the broker would spend on his own assets. As in standard agency problems, extra effort by a broker generates first-order stochastically dominant distributions of bids by potential buyers. Unlike standard agency problems, each broker can allocate his time or effort between selling the assets of his multiple clients and searching for new clients in competition with other brokers. Because brokers' time spent searching for new sellers is dissipative, entry by brokers is excessive in equilibrium.

[Brokerage contracts for many categories of real assets are characterized by a common, constant commission rate payable upon sale, exclusive agency, and contractual asking prices. For a large market in steady state, these conventional contracts produce in equilibrium no agency problem between a broker and his clients. Each broker spends the same time or effort selling each client's asset as the broker would spend on his own assets. As in standard agency problems, extra effort by a broker generates first-order stochastically dominant distributions of bids by potential buyers. Unlike standard agency problems, each broker can allocate his time or effort between selling the assets of his multiple clients and searching for new clients in competition with other brokers. Because brokers' time spent searching for new sellers is dissipative, entry by brokers is excessive in equilibrium.]