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Profit Maximization, Returns to Scale, and Measurement Error

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  • Lim, Hongil
  • Shumway, C Richard

Abstract

A nonparametric analysis of agricultural production behavior was conducted for each of the contiguous forty-eight states for the period 1956-82 under the joint hypothesis of profit maximization, convex technology, and nonregressive technical change. Tests were conducted in each state for profit maximization and for constant returns to scale. Although considerable variability was observed among states, measurement errors of magnitudes common in secondary data yielded test results fully consistent with the profit-maximization hypothesis in all states with complete output and input data. Copyright 1992 by MIT Press.

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  • Lim, Hongil & Shumway, C Richard, 1992. "Profit Maximization, Returns to Scale, and Measurement Error," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 430-438, August.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:3:p:430-38
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    Cited by:

    1. Featherstone, Allen M. & Moghnieh, Ghassan A. & Goodwin, Barry K., 1995. "Farm-level nonparametric analysis of cost-minimization and profit-maximization behavior," Agricultural Economics, Blackwell, vol. 13(2), pages 109-117, November.
    2. 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.
    3. Zereyesus, Yacob Abrehe & Featherstone, Allen M. & Langemeier, Michael R., 2009. "Farm Level Nonparametric Analysis of Profit Maximization Behavior with Measurement Error," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46829, Southern Agricultural Economics Association.
    4. 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.
    5. Qiujie Zheng & C. Richard Shumway, 2008. "Washington Biofuel Feedstock Crop Supply Analysis," Working Papers 2008-24, School of Economic Sciences, Washington State University.
    6. Laurens CHERCHYE & Timo KUOSMANEN & Thierry POST, 2001. "Non-Parametric Production Analysis under Alternative Price Conditions," Working Papers of Department of Economics, Leuven ces0105, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    7. Natalia Aldaz & Joaquín A. Millán, 2003. "A Comparison of Agricultural Productivity in the European Union Regions," ERSA conference papers ersa03p223, European Regional Science Association.
    8. Marcus Asplund, 2018. "Did the Swedish Tobacco Monopoly Set Monopoly Prices?," Economica, London School of Economics and Political Science, vol. 85(339), pages 532-557, July.
    9. Benson, Aaron & Shumway, C. Richard, 2005. "Induced Innovation or a Paradox of Environmental Regulation?," 2005 Annual meeting, July 24-27, Providence, RI 19450, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Scott E. Atkinson & Jeffrey H. Dorfman, 2009. "Feasible estimation of firm-specific allocative inefficiency through Bayesian numerical methods," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 675-697.
    11. Liu, Yucan & Shumway, C. Richard, 2005. "Empirical Tests of the Refutable Implications of Expected Utility Maximization under Risk," 2005 Annual meeting, July 24-27, Providence, RI 19331, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Qinghua Liu & C. Richard Shumway, 2004. "Testing aggregation consistency across geography and commodities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(3), pages 463-486, September.
    13. Elvira Silva & Spiro Stefanou, 2003. "Nonparametric Dynamic Production Analysis and the Theory of Cost," Journal of Productivity Analysis, Springer, vol. 19(1), pages 5-32, January.
    14. Lemberg, Beth & Wongcharupan, Metha, 1998. "Nonparametric Analysis Of Cost Minimization And Efficiency," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20952, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. 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.
    16. Aldaz, Natalia & Millán, Joaquín, 2002. "An Inter-Country Comparison of Agricultural Productivity with Intertemporal DEA," Efficiency Series Papers 2002/09, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    17. Zheng, Qiujie & Shumway, C. Richard, 2012. "Washington biofuel feedstock crop supply under output price and quantity uncertainty," Energy Policy, Elsevier, vol. 48(C), pages 515-525.
    18. Liu, Yucan & Shumway, C. Richard, 2005. "Indirect Utility Maximization under Risk: A Heterogeneous Panel Application," 2005 Annual Meeting, July 6-8, 2005, San Francisco, California 36307, Western Agricultural Economics Association.
    19. Shumway, C. Richard, 1995. "Recent Duality Contributions In Production Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(1), pages 1-17, July.
    20. Joaquín Millán & Natalia Aldaz, 2004. "Efficiency and Technical Change in Intertemporal Intersectoral DEA," Journal of Productivity Analysis, Springer, vol. 21(1), pages 7-23, January.

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