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Specification and Estimation of Production Risk, Risk Preferences and Technical Efficiency
Author(s) -
Kumbhakar Subal C.
Publication year - 2002
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/1467-8276.00239
Subject(s) - inefficiency , production (economics) , estimation , economics , preference , function (biology) , econometrics , parametric statistics , microeconomics , actuarial science , mathematics , statistics , management , evolutionary biology , biology
This article deals with specification and estimation of risk preferences, production risk, and technical inefficiency. It makes contribution in three separate areas of production economics. First, we model producers' attitude toward risk and derive risk preference functions (without assuming any parametric form of the utility function and any distribution of the error term representing production risk) when risk arises from production uncertainty and technical inefficiency. Second, the standard production risk model is extended to accommodate technical inefficiency and producers' attitude toward risk. Finally, the technical efficiency model is generalized to accommodate production risk and producers' attitude toward risk.