Non-convex technologies and cost functions: definitions, duality and nonparametric tests of convexity

Walter Briec (), Kristiaan Kerstens () and Philippe Vanden Eeckaut
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Walter Briec: UPVD - Université de Perpignan Via Domitia
Kristiaan Kerstens: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This contribution is the first systematic attempt to develop a series of nonparametric, deterministic technologies and cost functions without maintaining convexity. Specifically, we introduce returns to scale assumptions into an existing non-convex technology and, dual to these technologies, define non-convex cost functions that are never lower than their convex counterparts. Both non-convex technologies and cost functions (total, ray-average and marginal) are characterized by closed form expressions. Furthermore, a local duality result is established between a local cost function and the input distance function. Finally, nonparametric goodness-of-fit tests for convexity are developed as a first step towards making it a statistically testable hypothesis.

Date: 2004
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Published in Journal of Economics, 2004, 81 (2), pp.155-192

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05623508

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