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Estimating Production Activity Costs for Multioutput Firms with a Random Coefficient Regression Model
Author(s) -
Hornbaker Robert H.,
Dixon Bruce L.,
Sonka Steven T.
Publication year - 1989
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 - 10.2307/1241785
Subject(s) - production (economics) , linear regression , econometrics , regression analysis , variable cost , population , unit (ring theory) , linear model , statistics , variable (mathematics) , economics , mathematics , agricultural science , microeconomics , environmental science , mathematical analysis , demography , mathematics education , sociology
A random coefficient regression model provides an approach for estimating the mean variable costs of specific enterprise production activities for each output over a population of multioutput firms. The model specifically acknowledges that these farm‐level costs vary from farm to farm. In addition, best linear unbiased predictions can be estimated for each activity for an individual farm. The mean estimates are quite useful for ex post cost analysis, thereby providing per unit cost estimates for farmers, governmental agencies, and researchers. The best linear unbiased predictions can be used by individual farmers for planning yearly operations, applying for operating loans, and analyzing marketing strategies.