Estimating Economies of Scope Using Profit Function: A Dual Approach of the Normalized Quadratic Profit Function

Zhifeng Gao and Allen Featherstone

No 21103, 2006 Annual meeting, July 23-26, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Theoretical relationships between the parameters of the normalized quadratic cost and profit functions were derived. The cost function was recovered from an estimated profit function, and thus economies of scope (EOS) were calculated using a profit function. An empirical example showed that the parameters in the true cost function could be precisely recovered using the estimated profit function. Estimating economies of scope measures using profit function have several merits over that using cost function, which include easier imposition of curvature, avoiding calculating EOS off the production frontier and capturing the inefficiency in the allocation of output quantities. The EOS calculated using profit function was based on the traditional concept of EOS can be easily compared with the EOS that was computed using cost function.

Keywords: Research; Methods/; Statistical; Methods (search for similar items in EconPapers)
Pages: 18
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ageconsearch.umn.edu/record/21103/files/sp06ga03.pdf (application/pdf)

Related works:
Journal Article: Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea06:21103

DOI: 10.22004/ag.econ.21103

Access Statistics for this paper

More papers in 2006 Annual meeting, July 23-26, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).