Input Price Variation Across Locations and a Generalized Measure of Cost Efficiency
AbstractWe propose a nonparametric model for global cost minimization as a framework for optimal allocation of a firm's output target across multiple locations, taking account of differences in input prices and technologies across locations. This should be useful for firms planning production sites within a country and for foreign direct investment decisions by multi-national firms. Two illustrative examples are included. The first example considers the production location decision of a manufacturing firm across a number of adjacent states of the US. In the other example, we consider the optimal allocation of US and Canadian automobile manufacturers across the two countries.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2008-11.
Length: 22 pages
Date of creation: Mar 2008
Date of revision:
Note: The authors are grateful to William W. Cooper for insightful comments and suggestions for improvement on an earlier version of the manuscript. Responsibility for errors remains with the authors.
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Cost minimization; Data Envelopment Analysis; Heterogeneous technology; Location efficiency;
Other versions of this item:
- Ray, Subhash C. & Chen, Lei & Mukherjee, Kankana, 2008. "Input price variation across locations and a generalized measure of cost efficiency," International Journal of Production Economics, Elsevier, vol. 116(2), pages 208-218, December.
- NEP-ALL-2008-04-15 (All new papers)
- NEP-BEC-2008-04-15 (Business Economics)
- NEP-EFF-2008-04-15 (Efficiency & Productivity)
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