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A Nonparametric Approach to Expenditure‐Constrained Profit Maximization
Author(s) -
Färe Rolf,
Grosskopf Shawna,
Lee Hyunok
Publication year - 1990
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 - 10.2307/1243026
Subject(s) - profit maximization , nonparametric statistics , economics , profit (economics) , econometrics , maximization , microeconomics
A nonparametric approach to expenditure‐constrained profit maximization is developed. A deterministic frontier profit function is constructed with and without expenditure constraints. Foregone profit is used as dual evidence for the existence of expenditure constraints. Individual evaluations on performance and expenditure constraints are produced. Empirical analysis is based on survey data for California rice farms. Seventeen of the eighty‐two surveyed farms experience profit loss as a result of expenditure constraints.