Markets for many real assets are characterized by sequential search followed by bilateral bargaining between matched buyers and sellers. For a category of real assets, the joint, intertemporal valuation problems of buyers, owners, and sellers, and the associated Nash pricing function are solved explicitly. In equilibrium, the average transaction price is a noisy, proportional random walk, and the liquidity premium is positive for matched owners. Depending on the values of the parameters, the liquidity premium can be substantial. In a related problem of optimal development with costly search, the optimal exercise point, cost of development, and value of the undeveloped asset are calculated analytically. With search, development can occur sooner and undeveloped assets have lower market values than the standard solution without search.

[A subgame perfect Nash equilibrium is characterized for an industry with dissipative costs of agency. In sequence, firms can enter the industry, raise capital with external debt and/or equity, invest in a capital-intensive technology or dissipate capital in perquisites, and finally produce output. For plausible values of two critical parameters, some firms forego in equilibrium investments with positive net present values. Although more managers would like their firms to invest in the capital-intensive technology, they cannot raise the required cash in the capital market. In equilibrium, the industry can have both a profitable core of large, secure, capital-intensive firms, with some debt but no unique optimal capital structure, and a competitive fringe of small, risky, labor-intensive firms. Even as the cost of entry converges to zero, capital-intensive firms can earn extraordinary profits, while all labor-intensive firms fail. With costly agency, access to capital can become a barrier to entry.]

A subgame perfect Nash equilibrium is characterized for an industry with dissipative costs of agency. In sequence, firms can enter the industry, raise capital with external debt and/or equity, invest in a capital-intensive technology or dissipate capital in perquisites, and finally produce output. For plausible values of two critical parameters, some firms forego in equilibrium investments with positive net present values. Although more managers would like their firms to invest in the capital-intensive technology, they cannot raise the required cash in the capital market. In equilibrium, the industry can have both a profitable core of large, secure, capital-intensive firms, with some debt but no unique optimal capital structure, and a competitive fringe of small, risky, labor-intensive firms. Even as the cost of entry converges to zero, capital-intensive firms can earn extraordinary profits, while all labor-intensive firms fail. With costly agency, access to capital can become a barrier to entry.

[Markets for many real assets are characterized by sequential search followed by bilateral bargaining between matched buyers and sellers. For a category of real assets, the joint, intertemporal valuation problems of buyers, owners, and sellers, and the associated Nash pricing function are solved explicitly. In equilibrium, the average transaction price is a noisy, proportional random walk, and the liquidity premium is positive for matched owners. Depending on the values of the parameters, the liquidity premium can be substantial. In a related problem of optimal development with costly search, the optimal exercise point, cost of development, and value of the undeveloped asset are calculated analytically. With search, development can occur sooner and undeveloped assets have lower market values than the standard solution without search.]

Mean and variance measures of health information about cholesterol and saturated fat are included in a demand system for fats and oils. A Bayesian model of health risk belief and consumer awareness surveys are the basis for computing these measures. The empirical demand model shows that health information has resulted in significant increases in consumption for corn, cottonseed, and soybean oils and decreased consumption for butter and lard. The predicted demand effects based on the Bayesian information model are more reasonable than predictions from using either a time trend or a simple cumulative cholesterol information index.

This paper examines the performance of auditors in generating hypotheses in an analytical review case both prior to and after review. It partitions two possible sources of gain from the review process, namely the discussion effect and the rank effect. The discussion effect compares review groups with and without discussion. The rank effect compares seniors and audit managers. The study found that the review process results in more plausible hypotheses being generated. Discussion within the review process between reviewer and reviewee was found to be one source of gain from the review process. While there was no difference in the performance of the senior and manager reviewers, managers completed the task in less time.

[This article examines potential explanations for the wealth effects surrounding dividend change announcements. We find that new information concerning managers' investment policies is not revealed at the time of the dividend announcement. We also find that dividend increases (decreases) are associated with subsequent significant increases (decreases) in capital expenditures over the three years following the dividend change, and that dividend change announcements are associated with revisions in analysts' forecasts of current earnings. These results are consistent with the cash flow signaling hypothesis rather than the free cash flow hypothesis as an explanation for the observed stock price reactions to dividend change announcements.]