The Entropy Production Function and Its Application to the Multi-commodity and Multi-sector Model
Although the entropy function has been widely used in regional science, its underlying economic implications do not seem to have been explored in a significant way. The main purpose of this paper is an attempt to reconcile entropy model approaches with production theory in economics. In order to do so, we start with an appropriate assumption about cross-price elasticities of the input demand function of individual firms, and show that the existence of variations in price elasticities among demanded commodities induces heterogeneous production behaviour. As a result, we can have an entropic form of the production function. This type of production function is first developed for a single output firm, then extended to include multi-output and multi-input production industries.
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Volume (Year): 28 (1994)
Issue (Month): 4 (December)
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