Nonparametric Production Analysis under Alternative Price Conditions

Laurens Cherchye, Timo Kuosmanen and Thierry Post ()

Public Economics Working Paper Series from Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics

Abstract: The literature on non-parametric production analysis has formulated tests for profit maximizing behavior that do not require a parametric specification of technology. Negative test results have conventionally been interpreted as inefficiency, or have been attributed to data perturbations. In this paper, we exploit the possibility that negative test results reveal violations of the underlying neoclassical assumption that prices are exogenously fixed and perfectly certain. We propose non-parametric tests that do allow for endogenous price formation and price uncertainty. In addition, we investigate how to recover the technology and how to forecast behavior in new economic situations.

Keywords: non-parametric production analysis; endogenous price formation; price uncertainty (search for similar items in EconPapers)
Pages: 30 pp.
Date: 2001
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Citations: View citations in EconPapers (3)

Published (revised version) in International Journal of Production Economics (2002) as "Nonparametric Production Analysis in Non-Competitive Environments"

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