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Empirical properties of duality theory
Author(s) -
Lusk Jayson L.,
Featherstone Allen M.,
Marsh Thomas L.,
Abdulkadri Abdullahi O.
Publication year - 2002
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.00166
Subject(s) - hessian matrix , monte carlo method , econometrics , duality (order theory) , profit (economics) , mathematics , dual (grammatical number) , empirical research , economics , statistics , microeconomics , discrete mathematics , art , literature
This research examines selected empirical properties of duality relationships. Monte Carlo experiments indicate that Hessian matrices estimated from the normalised unrestricted profit, restricted profit and production functions yield conflicting results in the presence of measurement error and low relative price variability. In particular, small amounts of measurement error in quantity variables can translate into large errors in uncompensated estimates calculated via restricted and unrestricted profit and production functions. These results emphasise the need for high quality data when estimating empirical models in order to accurately determine dual relationships implied by economic theory.