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Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function

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  • Gao, Zhifeng
  • Featherstone, Allen M.

Abstract

Theoretical relationships between parameters of the normalized quadratic profit and cost functions are derived allowing for economies of scope to be calculated using profit function estimates. An empirical example confirms that the cost function is recovered using the estimated profit function.

Suggested Citation

  • Gao, Zhifeng & Featherstone, Allen M., 2008. "Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function," Economics Letters, Elsevier, vol. 100(3), pages 418-421, September.
  • Handle: RePEc:eee:ecolet:v:100:y:2008:i:3:p:418-421
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    References listed on IDEAS

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    1. Songqing Jin & Scott Rozelle & Julian Alston & Jikun Huang, 2005. "Economies Of Scale And Scope And The Economic Efficiency Of China'S Agricultural Research System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 1033-1057, August.
    2. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
    3. Allen M. Featherstone & Charles B. Moss, 1994. "Measuring Economies of Scale and Scope in Agricultural Banking," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 655-661.
    4. J. Fernandez-Cornejo & C. M. Gempesaw II & J. G. Elterich & S. E. Stefanou, 1992. "Dynamic Measures of Scope and Scale Economies: An Application to German Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 329-342.
    5. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    6. Lusk, Jayson L. & Featherstone, Allen M. & Marsh, Thomas L. & Abdulkadri, Abdullahi O., 1997. "Empirical properties of duality theory," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 0(Issue 1), pages 1-24.
    7. Berger, Allen N. & Hunter, William C. & Timme, Stephen G., 1993. "The efficiency of financial institutions: A review and preview of research past, present and future," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 221-249, April.
    8. Cohn, Elchanan & Rhine, Sherrie L W & Santos, Maria C, 1989. "Institutions of Higher Education as Multi-product Firms: Economies of Scale and Scope," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 284-290, May.
    9. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
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    Cited by:

    1. Pokharel, Krishna P & Featherstone, Allen M, 2016. "A Nonparametric Approach to Estimate Multiproduct and Product-specific Scale and Scope Economies for Agricultural Cooperatives," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236182, Agricultural and Applied Economics Association.
    2. Featherstone, Allen M. & Burbidge, Linda D., 2010. "A Comparison of Methods for Imposing Curvature on the Normalized Quadratic Indirect Profit Function," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61661, Agricultural and Applied Economics Association.
    3. Pierre Dupraz & Chalachew Temesgen Jemberie, 2012. "Farmland rental rate and marginal return to land: A french FADN perspective," Post-Print hal-01208927, HAL.

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