Farm Level Nonparametric Analysis of Profit Maximization Behavior with Measurement Error

Yacob A. Zereyesus, Allen Featherstone () and Michael R. Langemeier

No 46829, 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia from Southern Agricultural Economics Association

Abstract: This paper tests the farm level profit maximization hypothesis using a nonparametric production analysis approach allowing for measurement error in the input and output variables. All farms violated Varian’s deterministic Weak Axiom of Profit Maximization (WAPM). The magnitude of minimum critical standard errors required for consistency with profit maximization, convex technology production was smaller after allowing technological change during the sample period. Results indicate strong support for the presence of technological change during the sample period.

Keywords: nonparametric analysis; profit maximization; measurement error; technological change; Production Economics; D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: 2009
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