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The State‐Contingent Properties of Stochastic Production Functions
Author(s) -
Chambers Robert G.,
Quiggin John
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 - 10.1111/1467-8276.00314
Subject(s) - generalization , production (economics) , multiplicative function , state (computer science) , representation (politics) , function (biology) , mathematical economics , mathematics , economics , econometrics , mathematical optimization , computer science , microeconomics , algorithm , politics , political science , law , biology , mathematical analysis , evolutionary biology
The state‐contingent properties of the most frequently used representations of stochastic production in the agricultural‐economics literature are examined. Particular attention is paid to the cases of multiplicative uncertainty, additive uncertainty, and the Just‐Pope production function. State‐contingent technologies and their associated cost functions are reviewed, and that theory is applied to the stochastic production function. A generalization of the Just‐Pope technology that has desirable state‐contingent characteristics is proposed. Cost functions based upon state‐contingent technologies are compared with cost functions based on a parametrized distribution representation of production uncertainty.