On the estimation of marginal cost

Manthos Delis (), Maria Iosifidi and Mike Tsionas

MPRA Paper from University Library of Munich, Germany

Abstract: This article proposes a general empirical method for the estimation of marginal cost of individual firms. The new method employs the smooth coefficient model, which has a number of appealing features when applied to cost functions. The empirical analysis uses data from a unique sample from which we observe marginal cost. We compare the estimates from the proposed method with the true values of marginal cost, and the estimates of marginal cost that we obtain through conventional parametric methods. We show that the proposed method produces estimated values of marginal cost that very closely approximate the true values of marginal cost. In contrast, the results from conventional parametric methods are significantly biased and provide invalid inference.

Keywords: Estimation of marginal cost; Parametric models; Smooth coefficient model; Actual and simulated data (search for similar items in EconPapers)
JEL-codes: C14 C81 D24 G21 Q40 (search for similar items in EconPapers)
Date: 2012-12-01
New Economics Papers: this item is included in nep-ecm, nep-eff and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: On the Estimation of Marginal Cost (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43514

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