Title: Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology
Authors: Cherchye, Laurens * ×
De Rock, Bram *
Vermeulen, Frederic * #
Issue Date: 2008
Publisher: Operations Research Society of America
Series Title: Operations research vol:56 issue:1 pages:204-221
Abstract: In designing a production model for firms that generate multiple outputs, we take as a starting point that such multi-output production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in Economics and Business Management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.
ISSN: 0030-364X
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Department of Economics, Leuven - miscellaneous
Research Center of Public Economics, Leuven
* (joint) first author
× corresponding author
# (joint) last author

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