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Cost Functions Under Production Uncertainty

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  • Rulon D. Pope
  • Jean-Paul Chavas

Abstract

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.

Suggested Citation

  • Rulon D. Pope & Jean-Paul Chavas, 1994. "Cost Functions Under Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(2), pages 196-204.
    • Handle: RePEc:oup:ajagec:v:76:y:1994:i:2:p:196-204.
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    File URL: http://hdl.handle.net/10.2307/1243621
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    Cited by:

    1. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105, January.
    2. Wolfgang Britz & Linda Arata, 2019. "Econometric mathematical programming: an application to the estimation of costs and risk preferences at farm level," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 191-206, March.
    3. Loren Tauer & Zdenko Stefanides, 1998. "Success in maximizing profits and reasons for profit deviation on dairy farms," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 151-156, February.
    4. Britz, Wolfgang & Linda, Arata, "undated". "How Important Are Crop Shares In Managing Risk For Specialized Arable Farms? A Panel Estimation Of A Programming Model For Three European Regions," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244801, German Association of Agricultural Economists (GEWISOLA).
    5. Jesse B. Tack & Rulon D. Pope & Jeffrey T. LaFrance & Ricardo H. Cavazos, 2015. "Modelling an aggregate agricultural panel with application to US farm input demands," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 42(3), pages 371-396.
    6. Erwin Bulte & Joost Pennings, 1997. "A Note on Overfishing, Fishing Rights and Futures Markets," European Journal of Law and Economics, Springer, vol. 4(4), pages 327-335, December.
    7. Lin, Boqiang & Wang, Xiaolei, 2014. "Exploring energy efficiency in China׳s iron and steel industry: A stochastic frontier approach," Energy Policy, Elsevier, vol. 72(C), pages 87-96.
    8. Joost M.E. Pennings & Raymond M. Leuthold, 1999. "Futures Exchange Innovations: Reinforcement versus Cannibalism," Finance 9905003, University Library of Munich, Germany.
    9. Jeffrey T. LaFrance & Rulon D. Pope, 2010. "Duality Theory for Variable Costs in Joint Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 755-762.
    10. Kusadokoro, Motoi, 2010. "Risk Aversion and Optimal Input Utilization under State Contingent Technology," Japanese Journal of Agricultural Economics (formerly Japanese Journal of Rural Economics), Agricultural Economics Society of Japan (AESJ), vol. 12, pages 1-13.
    11. Emir Malikov & Diego Restrepo-Tobón & Subal Kumbhakar, 2015. "Estimation of banking technology under credit uncertainty," Empirical Economics, Springer, vol. 49(1), pages 185-211, August.
    12. Weber, Thomas A., 2022. "Optimal matching of random parts," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    13. Raushan Bokusheva & Lajos Baráth, 2024. "State‐contingent production technology formulation: Identifying states of nature using reduced‐form econometric models of crop yield," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 805-827, March.
    14. Pennings, Joost M. E. & M. Leuthold, Raymond, 2001. "Introducing new futures contracts: reinforcement versus cannibalism," Journal of International Money and Finance, Elsevier, vol. 20(5), pages 659-675, October.
    15. Coyle, Barry T. & Wei, Ran & Rude, James, 2008. "Dynamic Econometric Models of Manitoba Crop Production and Hypothetical Production Impacts for CAIS," Working Papers 46630, Canadian Agricultural Trade Policy Research Network.
    16. Nadolnyak, Denis A. & Fletcher, Stanley M., 2005. "Estimating Vulnerability of U.S. Peanut Producers to Changes in Farm Support," 2005 Annual meeting, July 24-27, Providence, RI 19287, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 143-186, National Bureau of Economic Research, Inc.
    18. Kelly, David L. & Kolstad, Charles D. & Mitchell, Glenn T., 2005. "Adjustment costs from environmental change," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 468-495, November.
    19. Lin, Boqiang & Wang, Xiaolei, 2015. "Carbon emissions from energy intensive industry in China: Evidence from the iron & steel industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 746-754.
    20. Philippe K. Widmer & Maria Trottmann & Peter Zweifel, 2018. "Choice of reserve capacity by hospitals: a problem for prospective payment," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(5), pages 663-673, June.
    21. Thomas, N., 2021. "Alternative Crop Management Methods to Increase Crop Productivity and Farmer Utility," 2021 Conference, August 17-31, 2021, Virtual 315042, International Association of Agricultural Economists.
    22. Kolstad, Charles D. & Kelly, David L. & Mitchell, Glenn, 1999. "Adjustment Costs from Environmental Change Induced by Incomplete Information and Learning," University of California at Santa Barbara, Economics Working Paper Series qt9mx119gc, Department of Economics, UC Santa Barbara.
    23. Shumway, C. Richard, 1995. "Recent Duality Contributions In Production Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(1), pages 1-17, July.

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