Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology
Abstract
In designing a production model for firms that generate multiple outputs, we take as a starting point that such multi-output production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in Economics and Business Management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.Download Info
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.Bibliographic Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2319.Length: 32 pages
Date of creation: Sep 2006
Date of revision:
Publication status: published in: Operations Research, 2008, 56(1), 204-221
Handle: RePEc:iza:izadps:dp2319
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:
Related research
Keywords: nonparametric tests; production behavior; multi-product firms; input externalities; joint input use; economies of scope;Other versions of this item:
- Bram De Rock & Laurens Cherchye & Frederic Vermeulen, 2008. "Analyzing cost efficient production behavior under economies of scope: a nonparametric methodology," ULB Institutional Repository 2013/7536, ULB -- Universite Libre de Bruxelles.
- Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2006. "Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," Discussion Paper 2006-81, Tilburg University, Center for Economic Research.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- P32 - Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cherchye, L. & Abeele, P. Vanden, 2005.
"On research efficiency: A micro-analysis of Dutch university research in Economics and Business Management,"
Research Policy,
Elsevier, vol. 34(4), pages 495-516, May.
- Cherchye, Laurens & Vanden Abeele, Pierre, 2002. "On research efficiency: a micro-analysis of Dutch university research in economics and business management," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/138359, Katholieke Universiteit Leuven.
- Laurens Cherchye & Piet Vanden Abeele, 2002. "On Research Efficiency: A Micro-Analysis of Dutch University Research in Economics and Business Management," Public Economics Working Paper Series ces0206, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
- Kim, Kwansoo & Barham, Bradford L. & Chavas, Jean-Paul & Foltz, Jeremy, 2005.
"Research and Development at U.S. Research Universities: An Analysis of Scope Economies,"
Staff Paper Series
487, University of Wisconsin, Agricultural and Applied Economics.
- Kim, Kwansoo & Barham, Bradford L. & Chavas, Jean-Paul & Foltz, Jeremy D., 2005. "Research and Development at U.S. Research Universities: An Analysis of Scope Economies," 2005 Annual meeting, July 24-27, Providence, RI 19147, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Léopold Simar & Paul W. Wilson, 1998.
"Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models,"
Management Science,
INFORMS, vol. 44(1), pages 49-61, January.
- SIMAR, Léopold & WILSON, Paul, 1995. "Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models," CORE Discussion Papers 1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Timo Kuosmanen & Laurens Cherchye & Timo Sipiläinen, 2003.
"The Law of One Price in Data Envelopment Analysis: Restricting Weight Flexibility Across Firms,"
Microeconomics
0312006, EconWPA, revised 18 Dec 2003.
- Kuosmanen, Timo & Cherchye, Laurens & Sipilainen, Timo, 2006. "The law of one price in data envelopment analysis: Restricting weight flexibility across firms," European Journal of Operational Research, Elsevier, vol. 170(3), pages 735-757, May.
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007.
"The Collective Model of Household Consumption: A Nonparametric Characterization,"
Econometrica,
Econometric Society, vol. 75(2), pages 553-574, 03.
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A nonparametric characterization," ULB Institutional Repository 2013/98559, ULB -- Universite Libre de Bruxelles.
- Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption: A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
- Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2007. "The collective model of household consumption: A nonparametric characterization," Open Access publications from Tilburg University urn:nbn:nl:ui:12-194157, Tilburg University.
- Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
- Peter Bogetoft, 1996. "DEA on Relaxed Convexity Assumptions," Management Science, INFORMS, vol. 42(3), pages 457-465, March.
- Cazals, Catherine & Florens, Jean-Pierre & Simar, Léopold, 2002.
"Nonparametric Frontier Estimation: A Robust Approach,"
Open Access publications from University of Toulouse 1 Capitole
http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January.
- Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-97, May.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-75, March-Apr.
- Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
- Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
- Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, vol. 56(6), pages 1315-32, November.
- Niels Christian Petersen, 1990. "Data Envelopment Analysis on a Relaxed Set of Assumptions," Management Science, INFORMS, vol. 36(3), pages 305-314, March.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & De Witte, Kristof, 2011.
"Nonparametric analysis of multi-output production with joint inputs,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/331174, Katholieke Universiteit Leuven.
- Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK & Kristof DE WITTE, 2011. "Nonparametric analysis of multi-output production with joint inputs," Center for Economic Studies - Discussion papers ces11.35, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2010.
"An Afriat theorem for the collective model of household consumption,"
ULB Institutional Repository
2013/131711, ULB -- Universite Libre de Bruxelles.
- Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2010. "An Afriat Theorem for the collective model of household consumption," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1142-1163, May.
- Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2008. "An Afriat Theorem for the Collective Model of Household Consumption," Discussion Paper 2008-72, Tilburg University, Center for Economic Research.
- Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2008. "An Afriat Theorem for the Collective Model of Household Consumption," IZA Discussion Papers 3794, Institute for the Study of Labor (IZA).
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "An Afriat Theorem for the collective model of household consumption," Center for Economic Studies - Discussion papers ces0825, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2008. "An afriat theorem for the collective model of household consumption," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/197557, Katholieke Universiteit Leuven.
- Bruyneel, Sabrina & Cherchye, Laurens & De Rock, Bram, 2006.
"Modeling collective rationality : an nonparametric test on experimental data,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/238133, Katholieke Universiteit Leuven.
- Sabrina Buyneel & Laurens Cherchye & Bram De Rock, 2006. "Modeling collective rationality: a nonparametric test on experimental data," Public Economics Working Paper Series ces0616, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
- Nobibon, Fabrice T. & Cherchye, Laurens & De Rock, Bram & Sabbe, Jeroen & Spieksma, Frits C.R., 2008.
"Heuristics for deciding collectively rational consumption behavior,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/198271, Katholieke Universiteit Leuven.
- Fabrice Talla Nobibon & Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frits Spieksma, 2011. "Heuristics for Deciding Collectively Rational Consumption Behavior," Computational Economics, Society for Computational Economics, vol. 38(2), pages 173-204, August.
- Talla Nobibon, Fabrice & Cherchye, Laurens & De Rock, Bram & Sabbe, Jeroen & Spieksma, Frederik, 2011. "Heuristics for deciding collectively rational consumption behavior," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/268772, Katholieke Universiteit Leuven.
- Fabrice Talla Nobibon & Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frits Spieksma, 2011. "Heuristics for deciding collectively rational consumption behavior," ULB Institutional Repository 2013/131710, ULB -- Universite Libre de Bruxelles.
- Fabrice Talla Nobibon & Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frits C.R. Spieksma, 2008. "Heuristics for deciding collectively rational consumption behavior," Center for Economic Studies - Discussion papers ces0824, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
Lists
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.Statistics
Access and download statisticsCorrections
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2319For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.

