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Do New York Dairy Farmers Maximize Profits or Minimize Costs?

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  • Loren W. Tauer

Abstract

The Weak Axiom of Profit Maximization and Weak Axiom of Cost Minimization were used to determine whether each of forty-nine New York dairy farms displayed behavior consistent with profit maximization or cost minimization. These were tested for each farm across eleven years of data, correcting for technological change using previously estimated nonparametric Malmquist productivity indices. The results indicate that some were moderately successful in maximizing profits, but more came closer to minimizing costs. Over half of the observations were within 10% of minimum costs.

Suggested Citation

  • Loren W. Tauer, 1995. "Do New York Dairy Farmers Maximize Profits or Minimize Costs?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 421-429.
    • Handle: RePEc:oup:ajagec:v:77:y:1995:i:2:p:421-429.
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    File URL: http://hdl.handle.net/10.2307/1243551
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    Cited by:

    1. Loren Tauer & Zdenko Stefanides, 1998. "Success in maximizing profits and reasons for profit deviation on dairy farms," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 151-156, February.
    2. Liu, John S. & Lu, Louis Y.Y. & Lu, Wen-Min & Lin, Bruce J.Y., 2013. "A survey of DEA applications," Omega, Elsevier, vol. 41(5), pages 893-902.
    3. Amar Oukil & Slim Zekri, 2021. "Investigating farming efficiency through a two stage analytical approach: Application to the agricultural sector in Northern Oman," Papers 2104.10943, arXiv.org.
    4. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, January.
    5. Goodhue, Rachael E. & Rausser, Gordon C. & Simon, Leo K., 2000. "Processor placements and producer incentives: analyzing broiler chicken production contracts," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2tc2g983, Department of Agricultural & Resource Economics, UC Berkeley.
    6. Ma, Hengyun & Rae, Allan N. & Huang, Jikun, 2004. "Livestock Productivity In China: Data Revision And Total Factor Productivity Decomposition," China Agriculture Project Working Papers 23691, Massey University, Centre for Applied Economics and Policy Studies.
    7. Goodhue, Rachael E. & Rausser, Gordon C. & Simon, Leo K., 1998. "Understanding Production Contracts: Testing An Agency Theory Model," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20946, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Masato Nakane & Loren Tauer, 2009. "Empirical dairy profits under fluctuating prices," Applied Economics, Taylor & Francis Journals, vol. 41(1), pages 5-15.
    9. Weir, Rebecca, 2022. "Financial performance of beginning dairy farmers in Minnesota," Master's Theses and Plan B Papers 324022, University of Minnesota, Department of Applied Economics.
    10. Loren W. Tauer, 1998. "Productivity of New York Dairy Farms Measured by Nonparametric Malmquist Indices," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 234-249, June.
    11. Jean Marie Abega Ngono & C¨¦lestin Chameni Nembua & Moses Abit Ofeh, 2019. "Financing Enterprises to Boost Employment in Cameroon," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(10), pages 77-92, October.
    12. Smith, H. Arlen & Taylor, C. Robert, 1998. "Finite Mixture Estimation Of Size Economies And Cost Frontiers In The Face Of Multiple Production Technologies," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(2), pages 1-10, December.
    13. Mundlak, Yair, 1999. "Production and Supply (Revised)," Working Papers 232819, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    14. Yacob Abrehe Zereyesus & Allen M. Featherstone & Michael R. Langemeier, 2021. "Are Kansas farms profit maximizers? A stochastic additive error approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 37-50, January.
    15. Vandermersch, Mieke & Mathijs, Erik, 2002. "Do Management Profiles Matter? An Analysis of Belgian Dairy Farmers," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24832, European Association of Agricultural Economists.
    16. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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