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Duality Theory for Variable Costs in Joint Production

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  • Jeffrey LaFrance
  • Rulon Pope

    ()
    (School of Economic Sciences, Washington State University)

Abstract

Duality methods for incomplete systems of consumer demand equations are adapted to the dual structure of variable cost functions in joint production. This allows the identification of necessary and sufficient restrictions on technology and cost so that the conditional factor demands can be written as functions of input prices, fixed inputs, and cost. These are observable when the variable inputs are chosen and committed to production, hence the identified restrictions allow ex ante conditional demands to be studied using observable data. This class of production technologies is consistent with all von Neumann-Morgenstern utility functions when ex post production is uncertain.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/LaFrance/WP2009-02-LP_DTiJP.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-02.

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Length: 14 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:wsu:wpaper:lafrance-4

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Keywords: Joint production; variable cost; duality theory;

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References

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  1. Jean-Paul Chavas, 2008. "A Cost Approach to Economic Analysis Under State-Contingent Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 435-466.
  2. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-89, August.
  3. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
  4. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September.
  5. LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October.
  6. Pope, Rulon D. & Just, Richard E., 1996. "Empirical implementation of ex ante cost functions," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 231-249.
  7. Jeffrey T. LaFrance, 1986. "The Structure of Constant Elasticity Demand Models," Development Research Unit Working Paper Series archive-28, Monash University, Department of Economics.
  8. Epstein, Larry G, 1982. "Integrability of Incomplete Systems of Demand Functions," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 411-25, July.
  9. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521785235.
  10. LaFrance, Jeffrey T., 1990. "Incomplete Demand Systems And Semilogarithmic Demand Models," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 34(02), August.
  11. Blackorby, Charles & Primont, Daniel & Robert Russell, R., 1977. "Dual price and quantity aggregation," Journal of Economic Theory, Elsevier, vol. 14(1), pages 130-148, February.
  12. Lopez, Ramon E, 1985. "Structural Implications of a Class of Flexible Functional Forms for Profit Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 593-601, October.
  13. Hall, Robert E, 1973. "The Specification of Technology with Several Kinds of Output," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 878-92, July-Aug..
  14. Jeffrey T. LaFrance & W. Michael Hanemann, 1989. "The Dual Structure of Incomplete Demand Systems," Development Research Unit Working Paper Series archive-21, Monash University, Department of Economics.
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Citations

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Cited by:
  1. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Timothy Graciano & Scott Colby, 2012. "Intertemporal Risk Management in Agriculture," Development Research Unit Working Paper Series 16-12, Monash University, Department of Economics.
  2. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Working Papers 16716, National Bureau of Economic Research, Inc.
    • Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies, pages 143-186 National Bureau of Economic Research, Inc.
  3. Eldon V. Ball & Ricardo Cavazos & Jeffrey T. LaFrance & Rulon Pope & Jesse Tack, 2010. "Aggregation and Arbitrage in Joint Production," Development Research Unit Working Paper Series archive-22, Monash University, Department of Economics.
  4. Santeramo, Fabio Gaetano, 2014. "On the Estimation of Supply and Demand Elasticities of Agricultural Commodites," MPRA Paper 56126, University Library of Munich, Germany.
  5. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Ricardo Cavazos, 2012. "Flexible Specification and Robust Estimation of Input Demand Systems," Development Research Unit Working Paper Series 48-12, Monash University, Department of Economics.

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