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Output Frontier Simulations with Joint Cobb-Douglas Production Functions and Variability in both Returns to Scale and Input Intensities

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Abstract

Convex output set is common hypothesis in both production theory and empirical applications such as the Data Envelopment Analysis. It seems to be taken for granted without any reference to returns to scale. This paper presents simulations for joint Cobb-Douglas production functions. The output frontier shape is showed to depend on two contrary forces. On the one hand, the higher the returns to scale, the more convex to the origin the output frontier. On the other hand, the larger the difference in input intensities of each production unit, the more concave to the origin the output frontier.

Suggested Citation

  • Patrick Alexandre & Jules Gazon, 1999. "Output Frontier Simulations with Joint Cobb-Douglas Production Functions and Variability in both Returns to Scale and Input Intensities," SEII Working Papers 991003, University of Liège Faculty of Econonomics, Management and Social Sciences Department of Economics Service of International and Interregional Economics.
    • Handle: RePEc:sei:seiiwp:991003
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    Keywords

    output; frontier; simulations; Cobb-Douglas; production function; increasing; returns to scale; input; intensity; frontière; production; économies d'échelle; rendements croissants;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • D2 - Microeconomics - - Production and Organizations

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