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Nonparametric Production Analysis under Alternative Price Conditions

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Author Info
Laurens Cherchye ()
Timo Kuosmanen
Thierry Post

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Abstract

The literature on non-parametric production analysis has formulated tests for profit maximizing behavior that do not require a parametric specification of technology. Negative test results have conventionally been interpreted as inefficiency, or have been attributed to data perturbations. In this paper, we exploit the possibility that negative test results reveal violations of the underlying neoclassical assumption that prices are exogenously fixed and perfectly certain. We propose non-parametric tests that do allow for endogenous price formation and price uncertainty. In addition, we investigate how to recover the technology and how to forecast behavior in new economic situations.

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File URL: http://www.econ.kuleuven.ac.be/ew/academic/econover/Papers/DPS0105.pdf
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Publisher Info
Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ces0105.

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Length: 30 pp.
Date of creation: 2001
Date of revision:
Publication status: Published (revised version) in International Journal of Production Economics (2002) as "Nonparametric Production Analysis in Non-Competitive Environments"
Handle: RePEc:wpe:papers:ces0105

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Related research
Keywords: non-parametric production analysis; endogenous price formation; price uncertainty;

References listed on IDEAS
Please 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.:

  1. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March. [Downloadable!] (restricted)
  2. Stigler, George J, 1976. "The Xistence of X-Efficiency," American Economic Review, American Economic Association, vol. 66(1), pages 213-16, March.
  3. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1 McMaster University Archive for the History of Economic Thought. [Downloadable!]
  4. Chavas, Jean-Paul & Cox, Thomas L, 1993. "On Generalized Revealed Preference Analysis," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 493-506, May. [Downloadable!] (restricted)
  5. Cox, Thomas L & Chavas, Jean-Paul, 1990. "A Nonparametric Analysis of Productivity: The Case of U.S. Agriculture," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 17(4), pages 449-64.
  6. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140. [Downloadable!] (restricted)
  7. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March. [Downloadable!] (restricted)
  8. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June. [Downloadable!] (restricted)
  9. Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91. [Downloadable!] (restricted)
  10. Chavas, Jean-Paul & Cox, Thomas L, 1990. "A Non-parametric Analysis of Productivity: The Case of U.S. and Japanese Manufacturing," American Economic Review, American Economic Association, vol. 80(3), pages 450-64, June. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
  12. Kuosmanen, Timo & Post, Thierry, 2003. "Measuring economic efficiency with incomplete price information," European Journal of Operational Research, Elsevier, vol. 144(2), pages 454-457, January. [Downloadable!] (restricted)
  13. M. J. Farrell, 1959. "The Convexity Assumption in the Theory of Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 67, pages 377. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
  15. 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. [Downloadable!] (restricted)
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(explanations, Please 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.)

  1. Cherchye, L. & Post, G.T., 2001. "Methodological Advances in Dea," Research Paper ERS-2001-53-F&A Revision_, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
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