Career Concerns, Inaction, and Market Inefficiency: Evidence from Utility Regulation

30 Pages Posted: 5 Feb 2011

See all articles by Meghan R. Busse

Meghan R. Busse

University of California, Berkeley - Haas School of Business

Severin Borenstein

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

Ryan Kellogg

University of California, Berkeley

Date Written: December 2010

Abstract

This paper examines how career concerns can generate inefficiencies not only within firms but also in market outcomes. Career concerns may lead agents to avoid actions that, while value-increasing in expectation, could potentially be directly associated with a bad outcome. We apply this theory to natural gas procurement by regulated public utilities and show that career concerns may lead to a reduction in surplus-increasing market transactions during periods when the benefits of trade are likely to be greatest. We show that data from natural gas markets are consistent with this prediction and difficult to explain using alternative theories.

Suggested Citation

Busse, Meghan R. and Borenstein, Severin and Kellogg, Ryan, Career Concerns, Inaction, and Market Inefficiency: Evidence from Utility Regulation (December 2010). Available at SSRN: https://ssrn.com/abstract=1755165 or http://dx.doi.org/10.2139/ssrn.1755165

Meghan R. Busse (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

2220 Piedmont Avenue, #1900
Berkeley, CA 94720-1900
United States
510-642-9489 (Phone)
510-643-5180 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/meghan/index.html

Severin Borenstein

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-3689 (Phone)
707-885-2508 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan Kellogg

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

HOME PAGE: http://are.berkeley.edu/~kellogg/index.html

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
23
Abstract Views
560
PlumX Metrics