Input Price Variation Across Locations and a Generalized Measure of Cost Efficiency

Subhash Ray, Lei Chen () and Kankana Mukherjee

No 2008-11, Working papers from University of Connecticut, Department of Economics

Abstract: We propose a nonparametric model for global cost minimization as a framework for optimal allocation of a firm's output target across multiple locations, taking account of differences in input prices and technologies across locations. This should be useful for firms planning production sites within a country and for foreign direct investment decisions by multi-national firms. Two illustrative examples are included. The first example considers the production location decision of a manufacturing firm across a number of adjacent states of the US. In the other example, we consider the optimal allocation of US and Canadian automobile manufacturers across the two countries.

Keywords: Cost minimization; Data Envelopment Analysis; Heterogeneous technology; Location efficiency (search for similar items in EconPapers)
Pages: 22 pages
Date: 2008-03
New Economics Papers: this item is included in nep-bec and nep-eff
Note: The authors are grateful to William W. Cooper for insightful comments and suggestions for improvement on an earlier version of the manuscript. Responsibility for errors remains with the authors.
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Citations: View citations in EconPapers (23)

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Journal Article: Input price variation across locations and a generalized measure of cost efficiency (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2008-11

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