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Estimating State-allocable Production Technologies When there are two States of Nature and State Allocations of Inputs are Unobserved

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Abstract

Chambers and Quiggin (2000) have used state-contingent production theory to establish important results concerning economic behaviour in the presence of uncertainty, including problems of consumer choice, the theory of the firm, and principal-agent relationships. Empirical application of the state contingent approach has proved difficult, not least because most of the data needed for applying standard econometric methods are lost in unrealized states of the world. O’Donnell and Griffiths (2006) show how a restrictive type of state-contingent technology can be estimated in a finite mixtures framework. This paper shows how Bayesian methodology can be used to estimate more flexible types of state-contingent technologies.

Suggested Citation

  • C.J. O’Donnell & S.Shankar, 2010. "Estimating State-allocable Production Technologies When there are two States of Nature and State Allocations of Inputs are Unobserved," CEPA Working Papers Series WP042010, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqcepa:50
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    File URL: https://economics.uq.edu.au/files/5247/WP042010.pdf
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    1. C. J. O'Donnell & W. E. Griffiths, 2006. "Estimating State-Contingent Production Frontiers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 249-266.
    2. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521785235.
    3. Christopher O’Donnell & Robert Chambers & John Quiggin, 2010. "Efficiency analysis in the presence of uncertainty," Journal of Productivity Analysis, Springer, vol. 33(1), pages 1-17, February.
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    Cited by:

    1. Sriram Shankar & John Quiggin, 2013. "Production under uncertainty: a simulation study," Journal of Productivity Analysis, Springer, vol. 39(3), pages 207-215, June.

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