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Estimating multiproduct costs when some outputs are not produced

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  • Quinn Weninger

Abstract

Pooling diversified and specialized firm data to analyze multiproduct cost technologies raises two issues in applied research: (1) a functional form must be specified that accommodates zero outputs, and (2) assumptions must be made regarding the structure of the multiproduct technology when some outputs are not produced. This article introduces a methodology to estimate the translog multiproduct cost function in the presence of zero outputs. The method adds flexibility to allow for and test competing structural assumptions. The added flexibility can improve measurement of the global properties of multiproduct cost structures. An application to a cross section of U.S. railway firms demonstrates this key advantage. Copyright Springer-Verlag 2003

Suggested Citation

  • Quinn Weninger, 2003. "Estimating multiproduct costs when some outputs are not produced," Empirical Economics, Springer, vol. 28(4), pages 753-765, November.
    • Handle: RePEc:spr:empeco:v:28:y:2003:i:4:p:753-765
    DOI: 10.1007/s00181-003-0157-5
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    Cited by:

    1. Kuo, Jenn-Shyong & Ho, Yi-Cheng, 2008. "The cost efficiency impact of the university operation fund on public universities in Taiwan," Economics of Education Review, Elsevier, vol. 27(5), pages 603-612, October.
    2. Gabriele Dono & Luca Giraldo & Simone Severini, 2012. "The Cost of Irrigation Water Delivery: An Attempt to Reconcile the Concepts of Cost and Efficiency," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(7), pages 1865-1877, May.
    3. Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 335-350, March.
    4. Ollinger, Michael & Ralston, Katherine L. & Guthrie, Joanne F., 2012. "Location, School Characteristics, and the Cost of School Meals," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(3), pages 1-19.
    5. Sakano, Ryoichi & Obeng, Kofi, 2011. "Examining the Inefficiency of Transit Systems Using Latent Class Stochastic Frontier Models," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 50(2).
    6. Bottasso, Anna & Conti, Maurizio & Piacenz, Massimiliano & Vannoni, Davide, 2011. "The appropriateness of the poolability assumption for multiproduct technologies: Evidence from the English water and sewerage utilities," International Journal of Production Economics, Elsevier, vol. 130(1), pages 112-117, March.
    7. Estache, Antonio & Iimi, Atsushi, 2011. "(Un)bundling infrastructure procurement: Evidence from water supply and sewage projects," Utilities Policy, Elsevier, vol. 19(2), pages 104-114, June.
    8. Thomas P. Triebs & David S. Saal & Pablo Arocena & Subal C. Kumbhakar, 2016. "Estimating economies of scale and scope with flexible technology," Journal of Productivity Analysis, Springer, vol. 45(2), pages 173-186, April.
    9. Dono, Gabriele & Giraldo, Luca, 2011. "Cost Analysis for Water Distribution in Agriculture," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114435, European Association of Agricultural Economists.
    10. Bönisch Peter & Tagge Sven, 2012. "The Optimal Size of German Child Care Centers and the Impact of Regulation: Estimating the Cost Function of a Regulated Multi-Product Firm," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(5), pages 545-566, October.

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    Keywords

    Translog multiproduct cost function;

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