Analyzing cost efficient production behavior under economies of scope

A nonparametric methodology

L.J.H. Cherchye, B. de Rock, F.M.P. Vermeulen

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput 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.
Original languageEnglish
Pages (from-to)204-221
JournalOperations Research
Volume56
Issue number1
Publication statusPublished - 2008

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Costs
Economics
Economies of scope
Methodology
Industry
Shadow price
Demand and supply
Business management
Research program
Externalities
Input use

Cite this

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title = "Analyzing cost efficient production behavior under economies of scope: A nonparametric methodology",
abstract = "In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput 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.",
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Analyzing cost efficient production behavior under economies of scope : A nonparametric methodology. / Cherchye, L.J.H.; de Rock, B.; Vermeulen, F.M.P.

In: Operations Research, Vol. 56, No. 1, 2008, p. 204-221.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

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T2 - A nonparametric methodology

AU - Cherchye, L.J.H.

AU - de Rock, B.

AU - Vermeulen, F.M.P.

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PY - 2008

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N2 - In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput 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.

AB - In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput 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.

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JO - Operations Research

JF - Operations Research

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