Estimating economies of scope and scale under price risk and risk aversion
Michael Langemeier and
Applied Economics, 2006, vol. 38, issue 2, 191-201
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.
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