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Input Decisions and Price‐Quality Schedules

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  • David A. Hennessy

Abstract

Often, a single production process gives rise to a mass distribution of quality levels. If prices vary with quality, then input use is determined by interactions between the production‐quality‐input use relationship and the price‐quality relationship. Using dominance methods, I investigate how price‐quality schedules affect optimal input choices. Integral and differential conditions on changes in schedules are found that, together with conditions on the quality‐conditioned technology, are sufficient to determine changes in the intensity of input use.

Suggested Citation

  • David A. Hennessy, 1999. "Input Decisions and Price‐Quality Schedules," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 168-177, July.
    • Handle: RePEc:wly:soecon:v:66:y:1999:i:1:p:168-177
    DOI: 10.1002/j.2325-8012.1999.tb00231.x
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    1. Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
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    4. Hadar, Josef & Seo, Tae Kun, 1990. "The Effects of Shifts in a Return Distribution on Optimal Portfolios," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 721-736, August.
    5. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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