Estimation of Profit Functions When Profit Is Not Maximum
AbstractThis paper deals with derivation and implications of profit functions when profit is not maximum due to the presence of either technical inefficiency or allocative inefficiency, or both. We show that input demand and output supply, elasticities, and returns to scale are, in general, affected by these inefficiencies. We also show that the overall profit efficiency is not necessarily the product of technical and allocative efficiencies, meaning that technical and allocative inefficiencies are not necessarily independent. Estimation techniques are developed for both cross-sectional and panel data models. Working of the model is illustrated using a panel of 60 salmon farms. Copyright 2001, Oxford University Press.
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Bibliographic InfoArticle provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.
Volume (Year): 83 (2001)
Issue (Month): 1 ()
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