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Estimating economies of scope and scale under price risk and risk aversion

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  • Abdullahi Abdulkadri
  • Michael Langemeier
  • Allen Featherstone

Abstract

This study uses duality to examine the effects of excluding output price risk and risk aversion on cost structures. Using data for Kansas wheat and beef-cow operations, a dual risk model was used to determine multi-product and product-specific scale economies, and economies of scope. Estimates for these measures were compared with those obtained from a deterministic model. The results show that product-specific scale economies are over-estimated and economies of scope and multi-product scale economies are under-estimated for the deterministic model compared to the risk model.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 2 ()
Pages: 191-201

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Handle: RePEc:taf:applec:v:38:y:2006:i:2:p:191-201

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  1. Shumway, C. Richard, 1995. "Recent Duality Contributions In Production Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July.
  2. Mike Smet & Walter Nonneman, 1998. "Economies of scale and scope in Flemish secondary schools," Applied Economics, Taylor & Francis Journals, vol. 30(9), pages 1251-1258.
  3. Geraint Johnes, 1996. "Multi-product cost functions and the funding of tuition in UK universities," Applied Economics Letters, Taylor & Francis Journals, vol. 3(9), pages 557-561.
  4. Batra, Raveendra N & Ullah, Aman, 1974. "Competitive Firm and the Theory of Input Demand under Price Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 537-48, May/June.
  5. Ting-Wong Cheng & Kuo-Liang Wang & Chih-Chiang Weng, 2000. "Economies of scale and scope in Taiwan's CPA service industry," Applied Economics Letters, Taylor & Francis Journals, vol. 7(6), pages 409-414.
  6. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
  7. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105.
  8. James Eales & Jason R. Henderson, 2001. "The Impact of Negativity on Separability Testing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 465-477.
  9. Elie Appelbaum & Aman Ullah, 1996. "Estimation of moments and production decisions under uncertainty," Working Papers 1996_9, York University, Department of Economics.
  10. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
  11. Paris, Quirino & Caputo, Michael R., 1995. "The Rhetoric Of Duality," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July.
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Cited by:
  1. Elie Appelbaum & Aman Ullah, 1996. "Estimation of moments and production decisions under uncertainty," Working Papers 1996_9, York University, Department of Economics.

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