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Disproportionate joint cost allocation at individual-farm level using maximum entropy

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  • Lips, Markus

Abstract

This paper addresses the allocation of joint cost among enterprises – also called ‘production branches’ or ‘activities’ – and presents an approach based on maximum entropy and standard costs from farm-management literature as allocation factors. The approach allows us to discard the widely applied assumption of a proportional joint cost allocation. Since it provides a disproportionate joint cost allocation, the distinctive feature of the approach is that it favours the adjustment of large standard costs rather than of small ones.

Suggested Citation

  • Lips, Markus, 2014. "Disproportionate joint cost allocation at individual-farm level using maximum entropy," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182851, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182851
    DOI: 10.22004/ag.econ.182851
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    References listed on IDEAS

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    1. Sergio H. Lence & Douglas J. Miller, 1998. "Recovering Output-Specific Inputs from Aggregate Input Data: A Generalized Cross-Entropy Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 852-867.
    2. Richard Howitt & Arnaud Reynaud, 2003. "Spatial disaggregation of agricultural production data using maximum entropy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(3), pages 359-387, September.
    3. Yves Léon & Ludo Peeters & Maurice Quinqu & Yves Surry, 1999. "The use of maximum entropy to estimate input-output coefficients from regional farm accounting data," Post-Print hal-01931589, HAL.
    4. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
    5. Yves Léony & Ludo Peeters & Maurice Quinqu & Yves Surry, 1999. "The Use of Maximum Entropy to Estimate Input‐Output Coefficients From Regional Farm Accounting Data," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(3), pages 425-439, September.
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    Cited by:

    1. Dieterle, Maria & Schmid, Dierk & Lips, Markus, 2017. "Betriebszweigergebnisse für Bewertungszwecke? Ein Vergleich von zwei Bewertungsverfahren für kombinierte Ackerbau-/Milchviehbetriebe in der Schweiz," 57th Annual Conference, Weihenstephan, Germany, September 13-15, 2017 262005, German Association of Agricultural Economists (GEWISOLA).
    2. Lips, Markus, 2014. "Calculating full costs for Swiss dairy farms in the mountain region using a maximum entropy approach for joint-cost allocation," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 3(3), pages 1-9.

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    Productivity Analysis; Research Methods/ Statistical Methods;

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