Homotheticity and Non-Radial Changes

Robert Chambers and Thomas Mitchell

Journal of Productivity Analysis, 2001, vol. 15, issue 1, 39 pages

Abstract: Färe and Mitchell(1992) have shown that cost functions for a multi-output firmobey a particular output-scaling law if and only if the underlyingproduction technology is ray-homothetic. Multi-output firms,however, frequently change their output mix in addition to theirscale. Therefore, it is important to identify technologies thatpossess relatively tractable analytical characteristics whensubjected to non-radial changes in the output vector. This paperconsiders additive and other, more general, changes in the outputvector. One result shows that the cost function obeys an ``output-translationlaw'' if and only if the input correspondence is input homothetic,thus suggesting that ``input homotheticity'' is more than justan ``input-scaling'' property. Copyright Kluwer Academic Publishers 2001

Keywords: cost function; homotheticity; separability (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (23)

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DOI: 10.1023/A:1026543822945

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