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Efficiency measures for retail fertilizer dealers

  • Paul V. Preckel

    (1145 Krannert Building, Department of Agriculture Economics, Purdue University, West Lafayette, IN 47907)

  • Jay T. Akridge

    (1145 Krannert Building, Department of Agriculture Economics, Purdue University, West Lafayette, IN 47907)

  • Michael A. Boland

    (Department of Agriculture Economics, Kansas State University)

An application of tests of economically rational behavior by fertilizer retailers is presented. Tests are developed to measure efficiency of variable cost minimization, revenue maximization, and profit maximization. These tests include standard linear programming-based nonparametric efficiency tests and simpler but less conclusive tests which are performed using only simple arithmetic. Results indicate that fertilizer retailers act as variable cost minimizers, but not as revenue and profit maximizers. Additional tests isolate whether inefficiency in cost minimization is due to a perception of variable input fixity. Management can then take steps to focus efforts on input control. © 1997 John Wiley & Sons, Inc.

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Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 13 (1997)
Issue (Month): 5 ()
Pages: 497-509

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Handle: RePEc:wly:agribz:v:13:y:1997:i:5:p:497-509
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  1. Kopp, Raymond J. & Diewert, W. Erwin, 1982. "The decomposition of frontier cost function deviations into measures of technical and allocative efficiency," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 319-331, August.
  2. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
  3. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
  4. Kopp, Raymond J, 1981. "The Measurement of Productive Efficiency: A Reconsideration," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 477-503, August.
  5. Schmidt, Peter, 1976. "On the Statistical Estimation of Parametric Frontier Production Functions," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 238-39, May.
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