profit function approximations and duality applications to agriculture monte carlo simulations of profit functions indicate that flexible functional forms may be ranked nearly the same with respect to allen uzawa partial substitution elasticities or price and fixed factor elasticities flexible functional form approximations of output price elasticities are generally worse than approximations of input price or fixed factor elasticities minflex laurent functional forms did not appear to approximate underlying elasticities any better than did their translog and generalized leontief counterparts

altruism and time consistency the economics of fait accompli this paper analyzes the strategic and intertemporal interaction between two economic agents who have overlapping concerns such as altruistic concerns for each other s welfare the agents may be two individuals a social bureau and a client or two units in an organization we show how the presence of such common concerns may lead to socially inefficient outcomes in which one economic agent free rides on the other s concern we also briefly how this inefficiency and free riding in the context of interaction between individuals might be mitigated by compulsory social security systems as another example we interpret the inefficiency in terms of kornai s soft budget constraints within organizations

bargaining set with endogenous leaders a convergence result abstract we provide a notion of bargaining set for finite economies where the proponents of objections leaders are endogenous we show its convergence to the set of walrasian allocations when the economy is replicated

simple strategy proof approximately walrasian mechanisms abstract this note provides an indirect analysis of the incentive properties of the walrasian mechanism it presents mechanisms under which truth telling is a dominant strategy in finite exchange economies in contrast to the walrasian mechanism and whose outcomes generically approximate walrasian ones for large economies these mechanisms provide new insights on the well know trade off between efficiency and incentive compatibility in finite economies journal of economic literature classification numbers d50 d71 d78

nonconvergence of the mas colell and zhou bargaining sets in an nontransferable utility ntu exchange economy with a continuum of agents the mas colell bargaining set coincides with the set of walrasian equilibria in this paper we show that the mas colell bargaining set as well as a smaller bargaining set due to zhou may fail to converge to competitive outcomes in large finite ntu exchange economies this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

motivating devoted workers abstract when increased effort by a worker induces an employer to reduce its use of other inputs inefficiency may result in particular suppose that output increases with the worker s effort that a worker exerts extra effort because he values the output produced beyond the wage he earns that output increases with the capital the employer provides and that these levels are not verifiable under plausible conditions output is lower if the employer can commit to a level of capital than if it cannot if the employer cannot commit then output may decline as the worker values the output more when the employer pays the worker for increased output output may be lower when the worker values it than when he does not lastly efficiency may increase when a firm is paid more for a unit of output than its marginal social value and when the employer can commit to using a given level of other inputs

cost function estimation under risk aversion standard definitions of the cost function do not admit risk standard ex post approaches to cost function estimation yield biased and inconsistent estimates when production is stochastic recently an ex ante approach to cost function estimation with stochastic production has been developed by imbedding the distance function in the cost function estimation problem we generalize the approach to consider risk aversion in decision making only two empirical studies have considered stochastic production in cost function estimation both have required constant returns to scale we demonstrate a methodology sufficiently general to consider nonconstant returns to scale

output input and productivity measurement in u s agriculture 1948 79 tornqvist theil indexes of outputs and inputs are constructed these data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production constrained to constant returns to scale total factor productivity grew at an average annual rate of 1 75 compared with 1 70 per year estimated by the u s department of agriculture the similar estimates of productivity growth overshadow some important differences in measurement of individual inputs the major effort in measuring agricultural productivity is undertaken by the u s department of agriculture usda an american agricultural economics association task force on measuring productivity has examined the sources and procedures used in constructing the official statistics see loomis and barton lambert barton and durost the task force recommended that the usda adopt a series of specific improvements for constructing certain inputs and use an indexing procedure that does not impose a priori restrictions on the structure of production 1 this paper presents revised indexes of outputs and inputs the data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production the translog transformation function constrained to constant returns to scale 2 the indexes of outputs and inputs have the same form and their ratio coincides with the estimate of productivity growth

on the failure of core convergence in economies with asymmetric information in interim economies with asymmetric information we show that the coarse core of wilson 1978 does not converge to price equilibrium allocations as the economy is replicated this failure of core convergence is a basic consequence of asymmetric information and extends to any reasonable notion of either interim core or price equilibrium

cost functions and duality for stochastic technologies cost functions dual to stochastic production technologies are derived and their properties are discussed these cost functions are shown to be consistent with expected utility maximization without placing serious structural restrictions on the underlying technology

supply and demand functions for multiproduct u s cash grain farms biases caused by research and other policies this study presents new estimates of supply and demand elasticities for u s multiproduct cash grain farms and estimates of input and output bias effects caused by public and private crop research extension and farmers schooling the study also shows that the social rate of return to public crop research is large about 62 percent

modeling supply response in a multiproduct framework the paper models multiproduct supply response in agriculture and tests key assumptions traditionally maintained in supply response studies the technology is approximated by a restricted profit function the properties of the restricted profit function are imposed during estimation the hypothesis that maintains the existence of output price and quantity indexes that satisfy the adding up property is rejected the existence of individual production functions for each output is also rejected unless joint production is permitted the estimates of responsiveness of a particular commodity to changes in own price or prices of competing outputs are likely to be considerably understated

usefulness of pretests for estimating underlying technologies using dual profit functions translog and generalized linear approximating forms are used to estimate dual profit functions from stochastically simulated data generated from a known relatively complex technology under profit maximizing conditions the hypotheses of monotonicity convexity and equality of parameters common to the profit function and demand equations are tested this last hypothesis is always rejected and monotonicity is never rejected convexity is rejected for about a third of the translog models and fewer than 5 percent of generalized linear models neither approximating form strongly dominates the other for accuracy in estimating the underlying elasticities of substitution copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

how reliable is duality theory in empirical work the neoclassical theory of production establishes a dual relationship between the profit value function of a competitive firm and its underlying production technology this relationship commonly referred to as duality theory has been widely used in empirical work to estimate production parameters such as elasticities and returns to scale we generate a pseudo dataset by monte carlo simulations which starting from known production parameters yield a dataset with the main characteristics of u s agriculture in terms of unobserved firm heterogeneity decisions under uncertainty unexpected production and price shocks endogenous prices output and input aggregation measurement error in variables and omitted variables production parameters are not precisely recovered when performing econometric estimation based on the duality approach and the elasticity estimates are inaccurate deviations of own and cross price elasticities from initial median values given our parameter calibration range between 6 and 690 with an average of 90 also own price elasticities are as imprecisely recovered as cross price elasticities sensitivity analysis shows that results still hold for different sources and levels of noise and sample size used in estimation

expected profit price change and risk aversion perhaps no single area of recent inquiry has had greater impact on production economics than the duality results of shepard mcfadden and uzawa as lau binswanger and others have argued these dual approaches cost and profit functions have substantial advantages over primal specifications production functions plus equilibrium conditions although cost minimization is attractive for some problems like measuring the elasticity of substitution it seems sensible to view output as endogenous thus one must explain output changesat least for proper estimation this leads to profit maximization or some other explicit behavioral assumption the profit function approach is used increasingly in agricultural economics lau and yotopolous weaver yotopolous lau lin generally this approach is applied without formal recognition of risk or risk averse behavior the purpose of this note is to illustrate the changes in expected profit given various models of risk it shows that risk aversion biases the certainty results regarding factor demands and output supplies derived from the profit function the qualitative and quantitative nature of these biases also are analyzed these results should help researchers discern problems with the certainty approach and the possible consequences in agricultural applications where risk is present

a cost approach to economic analysis under state contingent production uncertainty this article explores the economics of input decision under production uncertainty the article develops a methodology to specify and estimate cost minimizing input decisions under a state contingent technology the analysis is applied to time series data on u s agriculture it finds strong empirical evidence that expected output alone does not provide an appropriate representation of production uncertainty the results provide empirical support for an output cubical technology this indicates that an ex post analysis of stochastic technology appears appropriate the analysis also provides evidence that the cost of facing production risk has declined in u s agriculture over the last few decades copyright 2008 oxford university press

random profits and duality dual production specifications derived under certainty are typically randomized for econometric purposes with ad hoc error specifications this article shows that such approaches can cause integrability conditionsto fail in particular if errorsin input demands represent errorsin optimization that affect output then typical dual approachesdo not yield congruent suppliesand demands copyright 2002 oxford university press

on the choice offunctional forms in agricultural production analysis empirical results obtained by an analyst may depend on prior choice of functional form three alternative parametric specifications of the cost function are considered these are generalized leontief translog and normalized quadratic functions performance of these functional forms is evaluated by allen elasticities of substitution biases in technical change and some theory based hypotheses all three parametric specifications yielded mixed results together empirical results reinforce the need for model specification searches

a virtually ideal production system specifying and estimating the vips model we characterize the class of profit functions termed vips for virtually ideal production system vips is consistent with all derived demands being linear in numeric functions of output prices a flexible but parsimonious version of the vips profit function is specified and the implied supply response system is estimated using aggregate u s agricultural data

risk aversion and price risk in duality models of production a linear mean variance approach a duality model of production is developed that permits risk aversion and price uncertainty the linear mean variance framework employed is tractable for empirical research in contrast to duality models of risk based on a generalized expected utility function the framework is more general than in standard price certainty models while retaining the simplicity needed for empirical research

risk aversion and yield uncertainty in duality models of production a mean variance approach a duality model of production is developed that endogenizes stochastic output decisions under risk aversion the model incorporates both yield and price uncertainty and nonlinear mean variance risk preferences this permits modeling of the firm s expected output supply and input demand decisions under risk and also in principle the firm s output variance decisions the duality model is tractable for empirical research

joint estimation of risk preferences and technology flexible utility or futility a thought experiment is designed to investigate whether the structure of risk aversion i e the changes in absolute or relative risk aversion associated with changes in wealth can be estimated with reasonable precision from agricultural production data findings strongly suggest that typical production data are unlikely to allow identification of the structure of risk aversion a flexible utility parameterization is found to slightly worsen technology parameter estimates results also indicate that even under a restricted utility specification utility parameter estimates are biased further their quality is much worse when shocks are not large or samples are small

cost functions under production uncertainty we characterize the cost functions which would be consistent with expected utility maximization when production is uncertain it is not generally possible assuming risk aversion to use only expected output as the constraint in a cost minimization problem in some leading cases cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

input demands and inefficiency in u s agriculture markov chain monte carlo mcmc methods are used to estimate a seemingly unrelated regression sur system of input demand functions for u s agriculture our demand functions have flexible forms and allow for nonrandom technical inefficiency concavity constraints are imposed at individual data points and the distributions of measures of relative technical efficiency are constrained to the unit interval results are evaluated in terms of characteristics of the posterior distributions of parameters measures of relative technical efficiency and other nonlinear functions of the parameters

profit maximization returns to scale and measurement error a nonparametric analysis of agricultural production behavior was conducted for each of the contiguous forty eight states for the period 1956 82 under the joint hypothesis of profit maximization convex technology and nonregressive technical change tests were conducted in each state for profit maximization and for constant returns to scale although considerable variability was observed among states measurement errors of magnitudes common in secondary data yielded test results fully consistent with the profit maximization hypothesis in all states with complete output and input data copyright 1992 by mit press

estimation of area elasticities from a standard profit function this article demonstrates that both crop area and output elasticities can be calculated from a profit function a chambers just profit function which includes land allocations as quasi fixed factors is used to derive shadow price equations for each crop area allocation jointly solving these shadow price equations for crop area makes it possible to calculate individual crop area elasticities a profit function is specified to represent agricultural producers in the state of iowa shadow price equations are jointly estimated with output supply and input demand equations from these estimated equations we derive the individual crop area response and output response to a change in prices