Generalized Quadratic Revenue Functions

Robert G Chambers (), Rolf Färe (), Shawna Grosskopf () and Michael Vardanyan ()

No CESifo Working Paper No. 2404, CESifo Working Paper Series from CESifo Group Munich

Abstract: In this paper we focus on specification of revenue functions in their dual price space. We consider two distance functions, both dual to the revenue function: Shephard output distance function and the directional output distance function, both in price space. The former is multiplicative, satisfying homogeneity, the latter is additive satisfying transitivity. Functional equation methods yield translog specification for the Shephard case and quadratic for the directional case. Monte Carlo evidence suggests that the quadratic specification more precisely represents technology.

JEL-codes: C63 D24 (search for similar items in EconPapers)
Date: 2008
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