This article investigates expense preference behavior in the savings and loan industry. Previous studies used an intercept test and, in general, concluded that managers of mutual S&Ls exhibit expense preference behavior. I derive the necessary and sufficient conditions on cost functions for the...

In many imperfect-information models in industrial organization, a firm is induced to take an action that does not maximize its first-period profit because other firms view this action as a signal about the firm's private information. In these models, because the opponent firms can correctly...