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Tangency Capacity Notions Based upon the Pro?t and Cost Functions: A Non-Parametric Approach and a Comparison

  • Walter Briec

    (University of Perpignan, LAMPS)

  • Kristiaan Kerstens

    ()

    (CNRS-LEM (UMR 8179), IESEG School of Management)

  • Diego Prior

    (Universitat Autònoma de Barcelona, Spain)

This contribution provides a way to de?ne and compute a tangency notion of economic capacity based upon the relation between the various directional distance functions and the pro?t and cost functions using non-parametric technologies. A new result relating pro?t and cost function-based tangency capacity notions is established.

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Paper provided by IESEG School of Management in its series Working Papers with number 2009-ECO-05.

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Length: 23 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:ies:wpaper:e200905
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  1. COELLI, Tim & GRIFELL-TATJE, Emili & PERELMAN, Sergio, 2001. "Capacity utilisation and profitability: a decomposition of short run profit efficiency," CORE Discussion Papers 2001052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Nelson, Randy A, 1989. "On the Measurement of Capacity Utilization," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 273-86, March.
  3. Holland, D. S. & Lee, S. T., 2002. "Impacts of random noise and specification on estimates of capacity derived from data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 137(1), pages 10-21, February.
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  5. Subhash C. Ray & Kankana Mukherjee & Yanna Wu, 2006. "Direct And Indirect Measures Of Capacity Utilization: A Non-Parametric Analysis Of Us Manufacturing," Manchester School, University of Manchester, vol. 74(4), pages 526-548, 07.
  6. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1 McMaster University Archive for the History of Economic Thought.
  7. Fare, Rolf & Grosskopf, Shawna & Kokkelenberg, Edward C, 1989. "Measuring Plant Capacity, Utilization and Technical Change: A Nonparametric Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 655-66, August.
  8. Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2006. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 351-364.
  9. Simar, L. & Wilson, P.W., 1999. "Statistical Inference in Nonparametric Frontier Models: the State of the Art," Papers 9904, Catholique de Louvain - Institut de statistique.
  10. Paul Nightingale & Tim Brady & Andrew Davies & Jeremy Hall, 2003. "Capacity utilization revisited: software, control and the growth of large technical systems," Industrial and Corporate Change, Oxford University Press, vol. 12(3), pages 477-517, June.
  11. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
  12. Segerson, Kathleen & Squires, Dale, 1995. "Measurement of Capacity Utilization for Revenue-Maximizing Firms," Bulletin of Economic Research, Wiley Blackwell, vol. 47(1), pages 77-84, January.
  13. John B. Walden & James E. Kirkley & Andrew W. Kitts, 2003. "A Limited Economic Assessment of the Northeast Groundfish Fishery Buyout Program," Land Economics, University of Wisconsin Press, vol. 79(3), pages 426-439.
  14. Prior, Diego, 2003. "Long- and short-run non-parametric cost frontier efficiency: An application to Spanish savings banks," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 655-671, April.
  15. Segerson, Kathleen & Squires, Dale, 1990. "On the measurement of economic capacity utilization for multi-product industries," Journal of Econometrics, Elsevier, vol. 44(3), pages 347-361, June.
  16. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
  17. Ciaran Driver, 2000. "Capacity Utilisation and Excess Capacity: Theory, Evidence, and Policy," Review of Industrial Organization, Springer, vol. 16(1), pages 69-87, February.
  18. Jean-Paul Chavas & Kwansoo Kim, 2007. "Measurement and Sources of Economies of Scope: A Primal Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 411-427, September.
  19. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
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