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Estimating economies of scope and scale under price risk and risk aversion

Abdullahi Abdulkadri, Michael Langemeier and Allen Featherstone

Applied Economics, 2006, vol. 38, issue 2, 191-201

Abstract: This study uses duality to examine the effects of excluding output price risk and risk aversion on cost structures. Using data for Kansas wheat and beef-cow operations, a dual risk model was used to determine multi-product and product-specific scale economies, and economies of scope. Estimates for these measures were compared with those obtained from a deterministic model. The results show that product-specific scale economies are over-estimated and economies of scope and multi-product scale economies are under-estimated for the deterministic model compared to the risk model.

Date: 2006
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DOI: 10.1080/00036840500367716

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Handle: RePEc:taf:applec:v:38:y:2006:i:2:p:191-201