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The Opportunity Cost of Duality

Author

Listed:
  • Rolf Fare

    (Southern Illinois Univ. at Carbondale)

  • Daniel Primont

    (Southern Illinois Univ. at Carbondale)

Abstract

A dual representation of a technology, e.g., a cost function, may not contain all of the technological information, but it will contain all of the information about input vectors that would be chosen by a cost-minimizing firm. At least this much is clear for deterministic technologies. The main question addressed in this paper is whether the same can be said about stochastic technologies and their dual representations. Despite some pessimism expressed in the stochastic frontier literature on this question, we argue that there is no extra cost imposed in the stochastic case. Thus, the conclusion of this paper is: JUST DUAL IT!

Suggested Citation

  • Rolf Fare & Daniel Primont, 1995. "The Opportunity Cost of Duality," Microeconomics 9506001, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:9506001
    Note: 12 pages; written with Scientific Workplace (v. 2). Posted file is the binary dvi file (35,048 bytes). No figures.
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    Cited by:

    1. Luis Orea Sánchez & Rafael Álvarez Cuesta, 1998. "- Firm-Specific Temporal Variation In Technical Efficency Results Of: A Stochastic Output Distance Function," Working Papers. Serie EC 1998-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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