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Additive Nonhomogeneous Production Functions in Telecommunications

Author

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  • Ephraim F. Sudit

Abstract

An additive form of a nonhomogeneous production function is suggested in this paper as a tool to study economic trends in production processes. This information allows for variable elasticities of substitution and for variable economies of scale, and is readily estimated by ordinary least squares. The marginal products are explicitly stated as a function of the input ratios. This additive nonhomogeneous functional form has been empirically tested on telecommunications data, related to Bell System, Western Electric, and Bell Canada production systems. Marginal products and elasticities have been computed and compared with the same series generated by a multiplicative nonhomogeneous form recently proposed by H.D. Vinod. Several similarities as well as major differences between the findings are cited and discussed. The author concludes that the additive formulation offers a more plausible description of some aspects of the Bell System and Bell Canada production processes than comparable findings generated by the multiplicative formulation.

Suggested Citation

  • Ephraim F. Sudit, 1973. "Additive Nonhomogeneous Production Functions in Telecommunications," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 499-514, Autumn.
    • Handle: RePEc:rje:bellje:v:4:y:1973:i:autumn:p:499-514
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    Cited by:

    1. Fitzroy A. Lee, 2001. "Imperfect Competition and Indirect Tax Structure in a Deregulated Telecommunications Sector," Public Finance Review, , vol. 29(6), pages 419-443, November.
    2. M. Ishaq Nadiri & Mark Schankerman, 1979. "The Structure of Production, Technological Change, and the Rate of Growth of Total Factor Productivity in the Bell System," NBER Working Papers 0358, National Bureau of Economic Research, Inc.
    3. Mirucki, Jean, 1980. "Vérification des conditions d'efficacité dans la production chez Bell Canada [Checking the conditions of efficient production in Bell Canada]," MPRA Paper 30147, University Library of Munich, Germany, revised Jun 1980.
    4. Lisa Correa, 2003. "Natural or Unnatural Monopolies in UK Telecommunications?," Working Papers 501, Queen Mary University of London, School of Economics and Finance.
    5. Lu, Yao-chi & Cline, Philip & Quance, Leroy, 1979. "Prospects for Productivity Growth in U.S. Agriculture," Agricultural Economic Reports 307753, United States Department of Agriculture, Economic Research Service.
    6. Mirucki, Jean, 1980. "Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson [Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]," MPRA Paper 27669, University Library of Munich, Germany, revised 1982.

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